# Vehicle Energy Performance Act of 2024: What It Means for Car Buyers and Manufacturers

This bill creates a carrot-and-stick approach to push car manufacturers toward building more fuel-efficient vehicles. Starting in 2026, buyers who purchase new cars with better-than-average fuel economy will get tax credits up to $5,000, while manufacturers selling cars with worse-than-average fuel economy will face fees starting in 2028.

The tax credit works by comparing how efficient your new car is compared to the average car from the previous year. If your car beats the median fuel economy, you qualify for a credit. The better your car performs relative to the industry average, the closer you get to the full $5,000 credit. For example, if the average car gets 30 miles per gallon and you buy one that gets 40 mpg, you'd qualify for a substantial credit. The credit can be transferred to the dealership, meaning you could get an instant discount at the point of sale instead of waiting to claim it on your taxes. This credit applies to regular passenger cars and light trucks and starts with model year 2026 vehicles.

On the flip side, manufacturers face a penalty for selling inefficient vehicles. Starting with model year 2028, any car that gets worse fuel economy than the industry median triggers a $5,000 fee per vehicle, scaled based on how far below average it falls. However, certain vehicles are exempt—heavy-duty trucks designed for commercial use, ambulances, and police vehicles won't face these fees. Both the credit and fee amounts will increase with inflation over time.

The bill also updates how plug-in hybrid vehicles (cars that run on both electricity and gasoline) are measured for fuel economy, requiring more realistic real-world data rather than manufacturer estimates, and mandates that window stickers clearly show the fuel economy credit available on each vehicle.

Vehicle Energy Performance Act of 2024

Casten, Sean

Vehicle Energy Performance Act of 2024This bill creates a refundable tax credit for new qualified high energy performance motor vehicles. The bill also modifies the calculation of the excise tax on fuel-inefficient vehicles (gas guzzler tax).The amount of the tax credit is based on a vehicle’s energy performance in the current and prior model year in comparison with the median and best vehicle energy performance overall in the prior model year. The maximum tax credit allowed is $5,000 beginning with model year 2026.The bill defines a new qualified high energy performance vehicle as any passenger automobile or light truck with a greater than median energy performance as compared to the same passenger automobile or light truck for the prior model year. A vehicle’s energy performance is based on miles per gallon-gasoline equivalent (MPGe).&nbsp;The bill requires the Department of the Treasury to publish the median and best vehicle energy performance for the model year by December 1, 2025, and for each year after, based on information reported by vehicle manufacturers.Finally, the bill imposes an excise tax on vehicles with low energy performance (beginning with model year 2028), which is based on a vehicle’s energy performance in the current and prior model year in comparison with the median and best vehicle energy performance overall in the prior model year. Under current law, the gas guzzler tax is imposed on vehicles that do not meet a fuel efficiency standard of at least 22.5 miles per gallon (MPG).