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US: EV Tax credit turns into rebate at the time of purchase

The US Department of the Treasury has changed the tax credit for electric cars. Consumers can benefit from it directly in the form of a rebate when buying from 1 January 2024.

Image: Ford

Currently, consumers can only claim the 7,500 tax credit for new EVs or the 4,000 dollar tax credit for used EVs when filing their tax return the following year. From 1 January 2024, they can transfer the credit to a car dealer, effectively reducing the vehicle’s price directly at the time of purchase. In other words, consumers no longer have to advance thousands of dollars.

For car buyers to claim the rebate, they must fulfil the same requirements as with the previous tax credit. For example, the income cap introduced in August 2022 still applies. Individuals with an annual income of more than $150,000 (or $300,000 for married couples) are not eligible for the tax credit (and the upcoming purchase rebate). If buyers wrongfully claim the rebate, they will have to pay a refund to the government on their next tax return.

Dealers, for their part, must also take action to offer the new rebate. Businesses must register via a new IRS website to be able to provide the discounts. From January, they will receive payment for tax credits within 72 hours to pass on directly to customers in the form of a rebate.

For the vehicles themselves, the familiar US value-added specifications apply. The vehicles must be assembled in North America, and the regulations and quotas for the origin of critical materials announced in April 2023 also apply.

This year, the US government will define what constitutes a “Foreign Entity of Concern” – because vehicles from such companies are excluded from US funding. This regulation and the specifications about the origin of components and materials are primarily aimed at limiting China’s influence on the US market.

The $4,000 tax credit for used electric vehicles has been available since this August, but was instated retroactively from 1 January 2023. Again, there is a list of qualifying models and other requirements – for example, the used car must not cost more than $25,000 and must be at least two years old. It must be purchased through a dealer and have a battery with at least 7 kWh on board (this applies, above all, to plug-in hybrids). In addition, certain income limits apply here as well. Another prerequisite is that a previous owner has not yet claimed the tax credit for the used electric vehicle.

reuters.com, npr.org, treasury.gov, irs.gov

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