The Treasury Department has issued new guidance that explains how car dealers can provide electric vehicle buyers with an immediate rebate, eliminating the need to wait until they file their taxes.
By 2024 Electric Vehicle Buyers Will Receive an Immediate Rebate of up to $7,500
On Friday, the Treasury Department released new guidelines that explain how car dealers can offer customers immediate access to the electric vehicle rebate, beginning in January 2024. This is part of the Biden administration’s efforts to reduce the cost of EVs, with the aim of increasing their adoption.
The new guidance explains how dealers can efficiently lower the price of an EV by up to $7,500 at the time of purchase, eliminating the need for customers to wait until they file their taxes to claim the credit.
The administration aims to persuade more people to consider an EV for their next purchase by providing the credit immediately. This aligns with the goal of reaching 50 percent of new car sales being EVs by 2030.
The New Guidance Lays Out How Dealers Can Effectively Reduce the Price of an EV
The electric vehicle tax credit, also referred to as the “clean vehicle tax credit” or 30D in IRS code, provides potential savings of up to $7,500 on a new EV purchase. This credit was passed as a component of the Inflation Reduction Act of 2021, a key initiative in President Joe Biden’s climate change combat efforts.
In the previous system, individuals had to pay the full price for a new EV and then wait until they filed their taxes to request a nonrefundable credit of up to $7,500 for a new EV or $4,000 for a used one.
A study conducted by George Washington University revealed that many car buyers, particularly those with low incomes, greatly favored receiving the credit as an instant rebate.
Now, dealers have the option to apply the credit as a discount at the time of purchase or offer it as cash to the buyer. Dealers who wish to participate will need to register through an IRS portal to implement the credit during the purchase. Buyers will need to confirm their eligibility based on the income limits specified in the tax credit rules before accepting the rebate.
The IRS Statement
Dealers have the option to offer a purchasing taxpayer a financial benefit in the form of cash, partial payment, or a down payment for the vehicle purchase. This allows the taxpayer to receive immediate financial assistance at the time of purchase, eliminating the need to wait for tax return filing to claim the credit.
Some dealers have expressed concerns about covering the cost for customers while awaiting government reimbursement. They fear a situation similar to the 2009 “Cash for Clunkers” program, where dealers provided cash rebates to owners trading in older, less efficient vehicles and faced delays in receiving repayments at that time.
This time, the IRS assures a different experience. According to the guidance, most dealers can expect reimbursement for the rebate within 72 hours and will have real-time tracking available through an online portal.
Advocates for electric vehicles have lauded these new rules, emphasizing their role in simplifying what was previously a more intricate procedure. Albert Gore, the executive director of the Zero Emissions Transportation Association, expressed his approval, stating, “This guidance streamlines access to the IRS’s tax credits for both new and used electric vehicles at the point of sale. A simplified process will maximize the benefits of these credits, benefiting not only drivers and their communities but also the entire electric vehicle supply chain.”