New Guidance to Expand Access to Clean Vehicle Tax Credits

The Department of the Treasury and the Internal Revenue Service today released guidance that will update the credit process for buyers that will help speed up the benefit for consumers. Starting on January 1st 2024, new IRS provisions “will allow consumers to transfer credit to car dealers, reducing purchase price of new and previously owned clean vehicles at time of sale.” This is a fundamental shift in the clean vehicle tax credit idea. Currently, if the vehicle and buyer meet the criteria, the tax credit effectively deducts what the buyer owes in federal taxes. For example, if you were buying an EV that met the criteria to claim the max of $7,500 and you owed $5,000 in taxes to the federal government, you would owe nothing on your return, but lose out on the additional $2,500 left. Now, the credit becomes effective immediately, so buyers could use it as a down payment for their purchase, enabling the full amount to be claimed much easier.

The official press release says:

“Under 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 January 1, 2024. This will effectively 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. Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit.”