Buying an electric vehicle in the United States right now can qualify eligible buyers for a federal tax credit of up to $7,500 for new vehicles and $4,000 for used vehicles. While this has been a great way to encourage people to make the jump into an electric car in 2023, there was a big problem — you had to wait until tax season to actually get your money.
In the United States, as of today, getting your $7,500 or $4,000 tax credit came at — you guessed it — tax time. So, if you bought an EV in April of 2023, you could be waiting until April of 2024 to actually get that tax credit. So, for those consumers who are conscious about their monthly car payment, they’d have to go without the tax credit when they finance their new car.
Thankfully, that is changing for 2024, and a ton of dealerships in the United States have signed up for the new program. As reported by Electrek, over 7,000 dealerships have signed up to offer the upcoming instant federal tax credit, which will allow consumers to instantly use their $3,500 (for used EVs) or $7,500 (for new EVs) tax credit when they buy their new electric vehicle from the dealership rather than having to wait until tax season to get their money. According to the report, that accounts for around half of dealerships in the United States.
This means that EV shoppers will actually be able to lower their monthly payment if they finance their new electric vehicle through participating dealerships since they can instantly use their tax credit to lower the purchase price of their new electric vehicle. Instead of consumers having to file for reimbursement at tax time, dealers will redeem the credit from the IRS directly and receive payment in three days.
The Inflation Reduction Act provides taxpayers with credits for qualified new and previously owned clean vehicles acquired and placed in service during the taxable year. Beginning Jan. 1, 2024, in certain situations, taxpayers will be able to transfer the new and previously owned clean vehicle credits to eligible entities.
Today’s guidance clarifies how taxpayers can elect to transfer new and previously owned clean vehicle credits to dealers who are eligible to receive advance payments of either credit. The proposed regulations and revenue procedure also provide guidance for dealers to become eligible entities to receive advance payments of new or previously owned clean vehicle credits.
This is a huge win for both consumers, dealers, and EV automakers. The price of entry into an EV is going to get even lower — at least in the monthly payments you’ll have to make for one. As someone who can’t pay a new car off all at once (I think that’s most people), I certainly appreciate getting the rebate immediately when I get the car and being able to roll those savings into the monthly payment.
The new program goes into effect on January 1st, so if you’ve been thinking about picking up an EV in 2024 and qualify for the tax credit, you just got more incentive to pull the trigger next year. You’ll just need to contact your local dealership to ensure they are participating in the program. I imagine this is going to be a key purchasing decision for people about which dealership they purchase their electric vehicle from.
Correction: Updated the used car tax credit to $4,000 instead of $3,500 for 2024.