In January, the IRS is set to streamline the federal EV tax credit, allowing electric vehicle (EV) buyers to immediately receive the $7,500 credit through dealerships. The Treasury Department disclosed this change, granting dealers the flexibility to either deduct the credit from the vehicle’s purchase price or offer it as cash to the buyer.
This revision also extends to purchasers utilizing the $4,000 credit for used EVs. Initially established by Congress with the Inflation Reduction Act of 2022, the EV tax credit was previously obtainable solely through tax returns, causing significant delays for early-year EV buyers. For instance, TechCrunch’s senior climate writer, Tim De Chant, expressed frustration over the wait for reimbursement after acquiring an Audi e-tron in the prior year, stating, “We bought our car in April. That took forever.”
To qualify for this credit, buyers must still meet specific income eligibility criteria and adhere to other regulations, and only certain EV models are eligible. This poses a challenge for those interested in vehicles like Toyota’s RAV4 and Prius Prime hybrids, as they are not manufactured in North America and therefore do not meet the criteria.
The IRS outlines the process for transferring the credit to dealers: buyers will complete necessary paperwork, while dealers will provide “required disclosures,” including written confirmation of the vehicle’s eligibility for the credit and its amount. The IRS commits to disbursing advance payments to dealers within 72 hours. Buyers will be responsible for repaying the IRS if they are found ineligible for the credit.
Questions arose on social media regarding the fairness of dealers in handling these credits, with concerns about potential price inflation. Nevertheless, there don’t seem to be any restrictions preventing companies that sell directly to customers, such as Tesla and Rivian, from utilizing the IRS’s new system. However, it remains unclear whether Rivian intends to take advantage of this update.
