Starting in January 2024, car dealers have the option to provide instant rebates to buyers of specific electric vehicles, as per new IRS guidelines. These guidelines specify that eligible vehicles may be eligible for a tax credit of up to $7,500. However, the exact credit amount depends on various factors, including the EV and its buyer meeting certain criteria, as well as the timing of the car purchase.
To be eligible for the electric car tax credit, a minimum battery capacity of seven kilowatt hours is required. Buyers cannot claim the credit if their adjusted gross income surpasses certain thresholds, which are $300,000 for married couples filing jointly and $150,000 for most single taxpayers. Additionally, the manufacturer’s suggested retail price of the EV must not exceed specific limits; for SUVs and pickup trucks, this limit is $80,000, whereas for typical electric vehicles, it must stay under $55,000. This restriction primarily benefits more affordable car manufacturers. While it’s disappointing that you can’t receive the rebate for an $81,000 Porsche Taycan, you can likely qualify for it with something like the Nissan Leaf S, which has a price of $27,400.
Certain electric vehicles purchased prior to 2024 could still be eligible for a rebate if they were acquired for personal use, not resale. For EVs put into service from April 18, 2023 onwards, the potential rebate amount will be determined based on factors like the vehicle’s manufacturer and battery capacity. Additionally, ownership duration requirements are in place to deter individuals from buying EVs solely to resell them and profit from the rebate.
The IRS maintains a list of eligible vehicles, which includes battery electric, plug-in hybrid, and fuel cell vehicles, on FuelEconomy.gov. They mention that the list will be continuously updated to reflect any new vehicle eligibility criteria.
Overall, the IRS’s suggested guidelines align with the Biden administration’s objective of achieving 50 percent of new car sales being electric vehicles (EVs) by 2030. The intention is that an immediate rebate will encourage more buyers to opt for electric cars, eliminating the need to wait for tax refunds as a reward for their purchase. Albert Gore, the executive director of the Zero Emissions Transportation Association, praises the IRS memo, saying, “This guidance simplifies access to the IRS’s tax credits for both new and used electric vehicles at the time of purchase.”