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Beginning on January 1, consumers will have the option to transfer these credits directly to a car dealership, effectively reducing the purchase price for the vehicle. This change is expected to potentially boost EV sales.
Currently, consumers can only benefit from the $7,500 credit for new EVs or the $4,000 credit for used EVs when they file their tax returns the following year.
According to the guidance released on Friday, consumers will be required to confirm that they meet specific income limits in order to be eligible for the tax credit or reimburse the government when filing their tax returns.
For newly purchased vehicles, the adjusted gross income limit stands at $300,000 for married couples and $150,000 for individuals.
This significant overhaul of EV tax credits was passed by Congress in August 2022 as a component of the $430 billion Inflation Reduction Act (IRA).
The Treasury Department also provided additional details regarding registration obligations and the process of transferring credits for car dealers.
Dealers will be required to complete registration on a newly established IRS website to be able to provide these credits. Starting in January, dealers can submit details of vehicle sales to the IRS and receive tax credit payments within 72 hours.
As per the proposed regulations disclosed on Friday, the transfer of credits and advance payments are generally not anticipated to impact the tax liability of dealers, and the payments made to dealers would not be considered part of a consumer’s gross income.
