Concessions can be worth as much as $7,500.
Car dealers can give buyers an instant rebate for purchasing certain electric vehicles starting in January of 2024, according to new guidance released by the IRS. The memo says eligible vehicles may qualify for a tax credit of up to $7,500. However, the credit amount will depend on whether an EV and its buyer meet certain requirements, and when a car is actually purchased.
For an electric car to qualify, it needs to have a minimum battery capacity of seven kilowatt hours. Buyers can’t claim the credit if their adjusted gross income exceeds certain thresholds – $300,000 if married and filing jointly, and $150,000 for the majority of single taxpayers. The manufacturer’s suggested retail price for the EV also can not exceed specific price points. For sport utility vehicles and pickup trucks, the cap is $80,000, for example. But for average electric vehicles to qualify, they can’t be more than $55,000, which really narrows the benefit for cheaper car makers. While it’s a bummer that you can’t get the rebate for an $81,000 Porche Taycan, you can probably get the benefit for something like the Nissan Leaf S that goes for $27,400.
Some EVs bought before 2024 might qualify for the rebate too, if they were bought and weren’t intended for resale. For vehicles placed in service on or after April 18, 2023, the IRS says the potential rebate will depend on a variety of factors including the vehicle’s make and battery capacity. There are also requirements in place for length of ownership to prevent unscrupulous buyers from snapping up an EV, reselling it and pocketing the rebate.
The IRS lists eligible vehicles, including battery electric, plug-in hybrid and fuel cell vehicles on FuelEconomy.gov. It says the list will be updated as more vehicle eligibility requirements take effect.
All in all, the proposed guidance by the IRS is in line with the Biden administration’s goal of having 50 percent of new car sales be driven by EVs before 2030. The hope is an instant rebate will incentivize more buyers to purchase an electric car rather than having to wait to see any tangible reward for their purchase when they file their taxes. Albert Gore, executive director of the Zero Emissions Transportation Association, commends the IRS’ memo stating, “This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale.”
