In 2024, You’ll Get Your $7,500 EV Tax Credit Up Front — Here’s How It Works
Written by
David Nadelle
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Maria Concepcion
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Car buyers in 2024 will have to mull over whether to buy an electric vehicle (EV) or consider an internal-combustion-engine (ICE) car, truck or SUV. Some big factors for switching to an EV include energy-efficient travel, reduced noise and less expensive operating costs.
However, government-endorsed tax credits might be the one thing that makes someone choose the EV way of driving. And now, getting their EV tax credits up front at a dealership might prompt even more drivers to take the plunge.
Buyers have had to wait until they filed their federal income taxes to receive the benefits of EV ownership. Still, starting in January, EV tax credits of up to $7,500 for new clean vehicles and up to $4,000 for used EVs can be applied at the point of sale and receive full credits from dealers even if they owe federal taxes, according to The Associated Press.
The change to federal tax breaks on EVs — part of the Inflation Reduction Act — was announced by the Biden Administration last week under guidance from the Department of Treasury and the Internal Revenue Service and is being implemented to help Americans buy electric and American car dealers grow their business.
“For the first time, the Inflation Reduction Act allows consumers to reduce the up-front cost of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses,” said Laurel Blatchford, the Treasury’s chief implementation officer for the Inflation Reduction Act, in a statement.
“The IRS has focused on streamlining this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits they are eligible for,” Blatchford added.
The Inflation Reduction Act continues to extend the current incentives of up to $7,500 in tax credits for select electric cars, plug-in hybrids and hydrogen-powered vehicles that meet government qualifications. The U.S. Department of Energy’s Office of Energy Efficiency & Renewable Energy has an up-to-date list of qualifying vehicles.
The EV incentives restrict qualifying vehicles to American-made electric vehicles or plug-ins with manufacturer’s suggested retail prices (MSRPs) of up to $80,000 and cars up to $55,000. Additionally, the rebates are limited to individuals reporting adjusted gross incomes of $150,000 or less on taxes, $225,000 for those filing as head of household, and $300,000 for joint filers.
Dealers need to hold state or local licenses to offer the credits and will be required to register on a new IRS website called Energy Credits Online, which should be up and running later this month.
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According to the Treasury Department, research has shown that consumers prefer to get credits or rebates immediately at the point of sale, and it’s hoped that this change will spur more drivers to buy EVs in the U.S., where going electric is still not a top priority.
According to a 2023 survey by the University of Chicago’s Energy Policy Institute and the AP-NORC Center for Public Affairs Research, only 19% of American adults said it’s “very” or “extremely” likely they would purchase an electric vehicle the next time they buy a car.
However, as AP points out, EV sales have increased significantly this year and now account for 7.5% of the automobile market. Americans bought 875,798 electric vehicles between the beginning of January and the end of September, a rise of 50.9% in sales during the first nine months of 2023 compared to the same period in 2022.
