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The bulk of Americans who buy qualified new electric vehicles are choosing to get the qualifying tax credit up front from the auto dealer instead of waiting until tax season, according to new data from the Treasury Department.
About 90% of consumers entitled to “new clean car“Tax credits worth up to $7,500 have required their tax credits to be issued as an advance payment, according to a Treasury Department official speaking on the matter.
“That means it’s popular,” Ingrid Malmgren, policy director for the nonprofit electric vehicle advocacy group Plug In America, said of the data.
Advance payments are a new additional financial mechanism created by the Inflation Relief Act that President Joe Biden signed into law in 2022. They allow dealers to provide an upfront discount to eligible buyers in the form of partial payment for electric vehicles, a down payment or a cash payment to consumers. . The IRS then reimburses the dealer.
Not everyone will necessarily qualify for the full $7,500, depending on factors such as the type of vehicle purchased.
The prepayment provision came into force on January 1.
Previously, all EV buyers had to wait until tax season a year after purchase to qualify for the relevant tax credits, meaning they could wait several months or longer.
Because the Clean Car Credit is non-refundable, households with a low annual tax burden may not be able to claim the full value of the tax credit on their returns. But that doesn’t apply to down payments: Eligible buyers receive the full price regardless of tax liability.
Prepayment is also available when purchasing used electric vehicles. A loan on a clean car you previously owned is worth up to $4,000.
Down payments can help make housing more affordable, Malmgren said. For example, a down payment means households may not have to seek funds from other sources to cover the down payment, she said. It can also lower the cost of your monthly car payments and overall interest costs, she added.
Since Jan. 1, auto dealers have filed nearly 100,000 sales reports for new and used electric vehicles with the IRS, indicating that consumers are eligible for the tax break, according to a Treasury spokesman.
Since Jan. 1, the Treasury Department has issued more than $580 million in advance payments, the official said.
“Demand is strong four months after implementation of this new provision, with American consumers saving more than half a billion dollars,” Treasury spokesman Haris Talwar said in a written statement.
Caveats for Advance Payments
Of course, there are some caveats to advance payments. First, not all car dealers participate.
Currently, more than 13,000 dealers are registered in the system. IRS Energy Credits Online Portal to facilitate these financial transfers to consumers. That number is up from more than 11,000 in early February.
By comparison, there were 16,839 franchised retail auto dealers operating in the United States in the first half of 2023, according to the National Automobile Dealers Association. There are also around 60,000 independent car dealers, although they mainly sell used cars. according to according to Cox Automotive estimates for 2021. Not all of these franchises or independent dealers necessarily sell electric vehicles.
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Additionally, not all electric vehicles or consumers will be eligible for tax credits.
The Inflation Relief Act contains requirements for the production of new electric vehicles, designed to encourage increased domestic production, that temporarily limit the models that qualify for a full or partial tax credit.
36 new models of electric vehicles have appeared. tax credits currently available in 2024This is evidenced by data from the US Department of Energy as of March 18.
Manufacturers of these models include Acura, Audi, Cadillac, Chevrolet, Chrysler, Ford, Honda, Jeep, Lincoln, Nissan, Rivian, Tesla and Volkswagen. Some models qualify for half the tax credit – $3,750 – instead of the full $7,500.
Cars and buyers must also meet other requirements, including household income limits and EV price thresholds.
Buyers must sign an affidavit at car dealerships certifying that their annual income does not exceed certain thresholds. Making a mistake usually requires consumers to repay IRS tax credits.