Jonathan M. Gitlin
2023-10-10 14:28:49
arstechnica.com
The beginning of this year saw a big change to the federal tax incentives applied to electric vehicles, altering which cars were eligible. And from next year, another change is coming, one that we think is long overdue. From January 1, 2024, you’ll be able to have the amount of the credit applied immediately to the car’s price at purchase rather than waiting until tax time.
The original IRS section 30D tax credit, meant to spur the adoption of plug-in vehicles, was tied to the storage capacity of a car’s battery pack. But from this year, the $7,500 credit is now linked to domestic battery manufacturing rather than just battery capacity, with annually escalating percentages of the battery required to come from the US or a country with a free trade agreement in order to qualify.
The changes to the credit—which were made under 2022’s Inflation Reduction Act—also address several problems with the old scheme. A $4,000 credit (IRS section 25E) was created for buyers of used EVs, and there are now income and price caps to address criticisms that the credit merely subsidized those wealthy enough not to need it.
Another problem has been that, since it’s a tax credit, one had to wait until filing that year’s taxes to claim it. Not a problem if you bought an EV at the end of the year, but it’s perhaps less convenient if the purchase was in February, for example.
But from the start of next year, the credit for either a new or used EV becomes transferable from the buyer to the car dealer on the condition that the full amount of the credit is applied to the purchase price of that vehicle. So, if you were buying a $25,000 used Mini Cooper SE (as an example), you could transfer the full $4,000 to the dealer and only have to pay the remaining $21,000.
The dealer electronically submits info to the IRS about the sale at the time of purchase, and it should receive the money from the IRS within three days.
This only applies to cars bought from car dealers registered with the IRS and not private sales, and there are some other conditions. If you return a new vehicle within 30 days of delivery, you can’t claim the credit, and if a used EV to which the credit has been applied is returned, it is no longer eligible for further credits. Buyers can’t claim the credit if they resell the new or used EV within 30 days of purchasing it, all of which should prevent abuse of the system.
These tweaks to the tax credit have been greeted warmly by clean-vehicle advocates. “This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale. A simplified process will maximize the benefit of these credits, not just to drivers and their communities, but to the entire EV supply chain,” said Albert Gore, executive director of the Zero Emission Transportation Association.