In a significant move to promote the adoption of electric vehicles (EVs), the IRS has released new guidance allowing car dealers to offer instant rebates to buyers of specific electric vehicles starting in January 2024. This memo outlines that eligible vehicles may qualify for tax credits of up to $7,500. However, the actual credit amount will be subject to various requirements, including the EV’s specifications and the buyer’s circumstances.
To qualify for the electric car tax credit, the vehicle must have a minimum battery capacity of seven kilowatt hours. Additionally, buyers cannot claim the credit if their adjusted gross income exceeds certain thresholds, which are $300,000 for married couples filing jointly and $150,000 for most single taxpayers. Furthermore, the manufacturer’s suggested retail price (MSRP) of the EV must not exceed specific price limits. For SUVs and pickup trucks, the cap is set at $80,000, while standard electric vehicles must have an MSRP of no more than $55,000. This provision ensures that the rebate primarily benefits buyers of more affordable EVs.
It’s worth noting that some EVs purchased before 2024 may also be eligible for the rebate, provided they were bought for personal use and not intended for resale. For vehicles placed in service on or after April 18, 2023, the IRS has established various criteria, including the make and battery capacity, to determine the potential rebate amount. Ownership duration requirements are also in place to prevent opportunistic reselling of EVs to exploit the rebate.
The IRS has compiled a list of eligible vehicles, encompassing battery electric, plug-in hybrid, and fuel cell vehicles, available on FuelEconomy.gov. This list will be regularly updated to incorporate evolving vehicle eligibility requirements.
Overall, this IRS guidance aligns with the Biden administration’s goal of achieving 50 percent of new car sales from EVs by 2030. The introduction of instant rebates aims to incentivize more buyers to opt for electric vehicles, providing them with tangible rewards at the point of purchase rather than having to wait until tax filing season. Albert Gore, Executive Director of the Zero Emissions Transportation Association, lauds the IRS memo, emphasizing that it simplifies access to new and used electric vehicle tax credits for all buyers during the purchase process.
