90% of eligible EV buyers receive $7,500 tax credit as down payment | Wilnesh News

A majority of Americans buying new, eligible electric vehicles are choosing to get related tax credits from car dealers up front rather than wait until tax season, according to new data from the Treasury Department.

About 90% of consumers qualify as “new cleaning vehicleA Treasury official said in background remarks that tax credits worth up to $7,500 have required the tax credits to be issued as an advance payment.

“That means it’s popular,” Ingrid Malmgren, policy director at Plug In America, a nonprofit electric vehicle advocacy group, said of the data.

Advance payments are a new optional financial mechanism created by the Inflation Reduction Act signed by President Joe Biden in 2022. They allow dealers to offer upfront rebates to qualifying buyers as part of their EV payment, down payment or cash. The IRS then provides reimbursement to the dealer.

Not everyone will qualify for the full $7,500, depending on factors such as the type of car purchased.

The prepayment rule takes effect on January 1st.

Previously, all electric vehicle buyers had to wait until the tax season the year after purchase to claim the relevant tax credits, meaning they could have to wait months or longer.

Because the clean vehicle credit is non-refundable, households with a lower annual tax burden may not be able to claim the full tax deduction on their tax return. But that’s not the case with down payments: Qualified buyers receive the full value, regardless of tax liability.

You can also pay upfront when buying a used electric vehicle. Credits for previously owned clean vehicles are worth up to $4,000.

Malmgren said down payments can help improve affordability. For example, a cash advance means families may not need to raise funds elsewhere for a down payment, she said. It can also lower the cost of your monthly car payment and overall interest charges, she added.

Treasury officials said that since Jan. 1, auto dealers have submitted about 100,000 time-of-sale reports for new and used electric vehicles to the Internal Revenue Service, indicating that consumers are eligible for tax breaks.

The official said the Treasury Department has issued more than $580 million in advances since Jan. 1.

“Four months into this new rule, demand is high and American consumers have saved more than $500 million,” Treasury Department spokesman Haris Talwar said in a written statement.

More than 13,000 dealers have registered on the platform. IRS Energy Credits Online Portal Facilitate these financial transfers to consumers. That number is up from more than 11,000 in early February.

For context, there were 16,839 franchised retail auto dealers in the United States in the first half of 2023, according to the National Automobile Dealers Association. There are also approximately 60,000 independent car dealers, although they mainly sell used cars, according to Cox Automotive Company Forecast 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 qualify for the tax break.

The Inflation Reduction Act imposes manufacturing requirements on new electric vehicles aimed at encouraging more domestic production, which temporarily limits the models eligible for full or partial tax credits.

A total of 36 new electric models Tax relief currently available through 2024according to U.S. Department of Energy data 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 sticker price thresholds.

Buyers are required to sign an affidavit at the car dealership confirming their annual income does not exceed certain eligibility thresholds. Making a mistake usually requires the consumer to repay the tax deduction to the IRS.