Americans who are buying new electric vehicles and qualify for a tax credit are choosing to receive the credit upfront from the car dealer rather than waiting until tax season, based on new Treasury Department data. About 90% of consumers eligible for the tax credit, which can be up to $7,500, have opted for the advance payment instead of waiting.
This advance payment option was created by the Inflation Reduction Act signed by President Biden in 2022. It allows dealers to offer an upfront discount to qualifying buyers, which can be provided as a partial EV payment, down payment, or cash payment. The IRS then reimburses the dealer.
Not all buyers will receive the full $7,500 tax credit, as it depends on factors like the type of car purchased. The advance payment provision went into effect on January 1, allowing eligible buyers to receive their tax credit sooner.
Advance payments are also available for used EV purchases, with a credit worth up to $4,000. Dealers have submitted around 100,000 reports to the IRS since January 1, signaling consumer eligibility for the tax break.
There are some requirements and limitations to consider with advance payments. Not all car dealers are participating, and there are specific criteria for EV models and buyers to qualify for the tax credit. Despite these caveats, the advance payment option has been popular, with over $580 million issued in advance payments since January 1.
The Treasury Department data shows that 90% of Americans buying qualifying new electric vehicles are opting to receive their associated tax credit upfront from the car dealer, rather than waiting until tax season. The advance payments are made possible by the Inflation Reduction Act signed by President Biden in 2022, allowing dealers to give an upfront discount to qualifying buyers that is then reimbursed by the IRS.
The new provision has been well-received, with more than $580 million in advance payments issued since January 1. However, not all car dealers are yet participating, with only about 13,000 out of over 16,000 registered with the IRS Energy Credits Online portal. There are also manufacturing requirements for new EVs that limit the models that qualify for the tax credit, with 36 models currently available for the credit in 2024.
Despite some limitations, the advance payments have been successful in helping American consumers save money and incentivize the purchase of electric vehicles. The new financial mechanism is allowing buyers to access their tax credit immediately, providing a boost to the EV market and promoting the transition to cleaner transportation options.
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