Electric vehicle buyers can now transfer their tax credits to automobile dealers and receive upfront payments that effectively cut the cost, according to IRS and Treasury Department’s recently issued guidance. They also provide information for dealers on how to become eligible entities to receive advance payments of new or previously owned clean vehicle credits.
Buyers of electric vehicles can transfer their new clean vehicle credit of up to $7,500, and previously owned clean vehicle credit of up to $4,000, to a car dealer beginning January 1, 2024, under the Inflation Reduction Act of 2022. In effect, this will lower the vehicle’s purchase price by offering buyers an immediate down payment on their vehicle at the point of sale, rather than having to wait until the following year to claim the credit on their tax return. Only vehicles purchased using the consumer clean vehicle credits qualify for the tax break.
The guidance in Rev. Proc. 2023-33 also covers registration procedures and the mechanics of the tax credit transfer for auto dealers. The guidance includes proposed eligibility rules for the previously owned clean vehicle credit, with the goal of providing consumers with additional certainty about their ability to claim and transfer the credit. The guidance clarifies that eligible consumers can transfer the full value of the new or previously owned vehicle credit regardless of their individual tax liability.
The IRS’s Fact Sheet 2023-22 revises frequently asked questions about new, previously owned, and qualifying commercial clean vehicles and provides information on transferring new and previously owned clean vehicle credits from a taxpayer to an eligible organization for cars placed in operation after December 31, 2023.
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