EV buyers will get up to $7,500 in immediate rebates starting in 2024

EV buyers will get up to $7,500 in immediate rebates starting in 2024

The Treasury Department released new guidelines on Friday detailing how car dealers can give customers accelerated access to electric vehicle rebates starting in January 2024. It's the latest move by the Biden administration to lower the cost of EVs in hopes that more people will buy them.

The new guidance explains how dealers can effectively reduce the price of an EV by up to $7,500 at the time of purchase rather than waiting until they file their taxes to claim the credit.

The administration hopes that by immediately implementing the credit, more people will be confident to consider an EV for their next purchase, helping to achieve the goal of making EVs 50 percent of new car sales by 2030.

The Electric Vehicle Tax Credit – also known as the “Clean Vehicle Tax Credit” or 30D, if you like the IRS code – can save up to $7,500 on the purchase of a new EV. The credit was approved as part of the Inflation Reduction Act of 2021, introduced as President Joe Biden's major effort to fight climate change.

Under the previous rules, a person would have to pay the full price for a new EV, then apply to receive a non-refundable credit of up to $7,500 for a new EV and $4,000 for a used EV. You have to wait until you file your taxes.

But a study by George Washington University found that many car buyers, especially those who were low-income, preferred to receive a credit in the form of an immediate rebate.

Now, dealers can apply the credit at the time of purchase – effectively making it a rebate – or offer the rebate to the buyer in the form of cash. Participating dealers must register through the IRS portal for the credit to be applied at the time of purchase. Before buyers can accept the rebate, dealers must confirm that they fall within the income limits specified in the tax credit rules.

According to the IRS:

A dealer may provide a financial benefit to the purchasing taxpayer in the form of cash or partial payment or down payment for the purchase of a vehicle. Instead of waiting to file a tax return and claim the credit, the taxpayer receives immediate financial benefits at the time of sale.

Some dealers have expressed concerns about customers paying bills while they wait to be paid by the government. They are concerned about a repeat of the so-called "Cash for Clunkers" program of 2009, in which dealers offered cash rebates to owners who traded in older, less efficient vehicles. At that time the dealers had complained about not receiving payment on time.

This time will be different, the IRS promises. As per the guidance, most dealers will receive reimbursement for rebates within 72 hours and will be able to track the progress in real-time through the online portal.

EV advocates praised the new rules, arguing that they would help simplify an already complex process. "This guidance makes it easier for everyone to access the IRA's new and used electric vehicle tax credit at the point of sale," Albert Gore, executive director of the Zero Emissions Transportation Association, said in a statement. “A simplified process will maximize the benefits of these credits, not only to drivers and their communities, but to the entire EV supply chain.”