The federal tax credit is one of the most common incentives for buying EVs in the US. However, buyers must wait to file their taxes before claiming the rebate. A major change to the tax credit will soon allow buyers to get the credit at the point of purchase instead.
The Internal Revenue Service (IRS) has released new procedures that allow car dealers to deduct the appropriate EV tax credit from sales price. This directive applies to both new and old EVs. It is in line with the IRS’ announcement of more sales options when the EV tax credit reform was announced.
The new set of guidelines will take effect from Jan. 1, 2024, according to the IRS, “The Internal Revenue Service issued proposed regulations, Revenue Procedure 2023-33 and frequently asked questions today for the transfer of new and previously owned clean vehicle credits from the taxpayer to an eligible entity for vehicles placed in service after Dec. 31, 2023.”
Car dealers can deduct the equivalent of the tax credit by accepting a partial payment or down payment or returning the cash value to the buyer.
The new directives, however, still require the buyer to have sufficient federal tax liability to take full advantage of the credit. Neither can the balance be carried over to another tax year. They only mean the buyer can get their money before the end of the tax year.
Against next year, Tesla has warned that its Model 3 might get less federal tax credit. Ford, however, had earlier complained that the new federal incentive scheme reduced credits on two of its three EVs.