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The federal government has issued more than $1 billion in tax credits as an upfront cash inducement for electric vehicle buyers, the Treasury Department and Internal Revenue Service said Wednesday.
The Inflation Reduction Act creates a mechanism through which tax credits can be provided to: Buyers of new and used electric vehicles – Valued up to $7,500 and $4,000 respectively – can be delivered by car dealers at the point of sale.
The regulation takes effect on January 1.
Previously, consumers had to wait until months or more than a year after purchasing a vehicle to file their annual tax return to receive the federal credit. Americans can also now receive EV tax credits up front regardless of their federal tax liability, which was not the case before 2024.
“This has never been done before,” Deputy Finance Minister Wally Adeyemo told a news conference.
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He called the $1 billion threshold a “significant milestone” that was achieved faster than expected.
“A lot of people want to see the savings now instead of waiting until next year to file their taxes,” Adeyemo said.
Trying to help electric vehicles compete on price
The transition to electric vehicles is a key component of the Biden administration Push to reduce U.S. greenhouse gas emissions and curb global warming.
The federal tax credit is intended to make electric vehicles more affordable for many families relative to gasoline-powered vehicles.
Adeyemo said the EV tax credit makes cars “very competitive in price and in some cases cheaper than internal combustion engine vehicles on the market.”
this average purchase price According to data from Cox Automotive, the price of an electric vehicle in April 2024 will be $55,242, while the price of a conventional vehicle will be $44,989. However, prices are falling rapidly: the average price of a new electric vehicle in the first quarter of 2024 fell 9% from the same period last year, the report said.
However, not all new electric vehicle models are currently eligible for federal tax credits as automakers aim to meet certain manufacturing standards under the Inflation Reduction Act. The law requires certain parts of a car to be made in North America to qualify for full or partial EV credits.
U.S. Department of Energy Maintain updated list Automakers and models eligible for EV credits.
Electric vehicle tax credit availability limited
Since the beginning of the year, about 125,000 consumers have chosen to receive the New Clean Car tax credit in the form of an upfront payment, according to the Treasury Department and Internal Revenue Service. They say this accounts for 90% of new EV transactions eligible for prepayment.
In addition, the agency said that 25,000 buyers chose to pay up front to obtain the “used clean vehicle” credit, accounting for 80% of eligible transactions.
Adeyemo said those numbers represent “a small fraction” of all electric vehicles sold in the U.S. so far this year. This does not include consumers who lease electric vehicles or make purchases that are not eligible for points.
senate republicans introduced a measure Federal tax credits for electric vehicles will end in May, as will tax breaks for electric vehicle charging stations.
Wyoming Republican Senator John Barrasso said in a written statement about the electric vehicle bill he co-sponsored, “The electric vehicle tax credit benefits the wealthiest Americans but leaves hard-working Americans American taxpayers lost billions of dollars.
Asked about such criticisms of the electric vehicle tax credit, Adeyemo pointed to the tax credit’s limitations on income and expected lifetime financial savings of households, suggesting it would not benefit the wealthiest households.
For example, single and married taxpayers whose annual income exceeds $150,000 and $300,000, respectively, are not eligible for the tax break on new electric vehicles. Used electric vehicles have lower income limits: $75,000 and $150,000 respectively.
There are also restrictions based on electric vehicle sticker prices. For example, SUVs and small cars have a sticker price of less than $80,000 and $55,000 respectively to qualify.
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