Treasury and IRS release guidance for program to offer rebates for EVs
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) released guidance on an initiative designed to provide rebates at the point of sale for new and previously owned electric, or clean, vehicles.
Through the Inflation Reduction Act, consumers can choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting Jan. 1, 2024. This will lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year.
The guidance issued this week provides additional information on registration requirements and how the mechanics of this transfer will work for car dealers. It also provides proposed eligibility rules for the previously owned clean vehicle credit that would give consumers more certainty on their ability to claim and to transfer the credit. Further, the guidance would clarify that eligible consumers may transfer the full value of the new or previously owned vehicle credit regardless of their individual tax liability.
“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. 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,” Chief Implementation Officer for the Inflation Reduction Act Laurel Blatchford said.
Later this month, dealers will be able to register via IRS Energy Credits Online, a new website. This registration is a requirement for dealers to offer consumers clean energy tax credits for qualifying electrified products. For buyers to be eligible to claim or transfer a credit starting Jan. 1, the dealer they purchase their vehicle from must first register with Energy Credits Online.
The guidance proposes rules regarding who is eligible to elect to transfer the credit to the dealer, and under what circumstances these taxpayers may have to pay back some of the transferred credit. The guidance also would include safeguards to help prevent fraud or abuse. In addition, it provides clarity on the federal income tax treatment of the transferred credit and advance payment for the buyer and the dealer.
Treasury and the IRS is now considering public comments and feedback. The Environmental Defense Fund (EDF) has already weighed in with its approval.
“Thanks to the Inflation Reduction Act there are already substantial tax rebates for buying an electric car or passenger truck – as much as $7,500 for a new one or $4,000 for a used one. These credits are available to low and middle-income purchasers and are designed to help incentivize production of made-in-America clean vehicles,” Peter Zalzal, associate vice president of clean air strategies for EDF, said. “The Treasury Department today unveiled new guidance that will allow people to get that rebate up front, as money off the car at the moment of sale, instead of waiting until they file their taxes to get the rebate. Studies show buyers, especially lower-income buyers, far prefer a point-of-sale rebate. These innovative cost savings will be available beginning in January 2024.”
