The U.S. Treasury Department announced in a press release on Friday that the federal EV tax credit will change to a point-of-sale dealership refund in 2024, providing customers immediate access to the benefit.
Currently, customers must wait to submit their taxes before claiming the credit, which is up to $7,500 for new cars and $4,000 for used cars. As part of the overhaul of the EV tax credit under the Inflation Reduction Act (IRA), EV purchasers will be able to collect their credit at the dealership beginning on Jan. 1, 2024.
The Inflation Reduction Act, according to Laurel Blatchford, chief implementation officer for the IRA, “allows consumers to reduce the upfront cost of a clean vehicle for the first time.” “The IRS has focused on streaming this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits they are eligible for.”
To be qualified to offer the credit at the point of sale, merchants must first register with the IRS. Additionally, buyers must certify that they fall under the IRA’s income restrictions; otherwise, they will be required to repay the credit the following year when they submit their taxes. For married couples filing jointly, the adjusted gross income cap is $300,000. For heads of household, it is $225,000; for everyone else, it is $150,000.
The IRA tax-credit rules also impose price caps of $55,000 for new automobiles and $80,000 for new trucks, SUVs, and vans for the full $7,500 tax credit. These price caps are in addition to the income ceiling. The requirements for acquiring battery-materials will increase, while the income and price restrictions will stay the same for the time being. However, what is thought to be an EV tax credit loophole reduces the actual cost of premium EVs and cheaper foreign-made EVs through leasing.
The credit amount may be given to eligible automobile buyers in cash or applied to the price of a new car or a down payment. Therefore, it is no longer a tax credit in the traditional sense.
A bigger impact than the credit amount can result from allowing customers to use the credit at the dealership. Consumers prefer lower-value point-of-sale rebates to longer-waiting, higher-value tax credits, according to a 2022 study. According to a statement from Albert Gore, executive director of the Zero Emission Transportation Association (ZETA), a point-of-sale rebate alone is noteworthy.
“This process simplifies and encourages the use of these key tax credits by enabling qualifying dealers to provide a cash discount on new and used EVs rather than requiring the buyer to claim the credit on their tax return at a later date.”
Since the 2009 “Cash for Clunkers” program offered cash refunds to drivers who traded in older, higher-emission vehicles, several auto dealers had been worried that the federal government would not pay them back right away. They cited a lengthy procedure under that program as evidence. However, Treasury Department guidelines provide that payments must be made within 72 hours following a sale. That, according to a Politico story, appears to have allayed those worries.
There has been talk of an EV rebate at the point of sale for some time. In 2011, the Obama administration made an attempt to create a federal incentive centered on point-of-sale refunds, but it was unsuccessful due to a lack of support.
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