Revolutionizing EV Tax Incentives: Dealerships to Offer Upfront Credits from January Onwards

Starting January 1, car buyers shopping for electric vehicles will be eligible for an immediate $7,500 federal tax credit at the dealership, eliminating the need to wait for their tax returns. The Biden administration announced this change, part of the Inflation Reduction Act, on Friday. Car dealerships will implement these updates before they officially take effect.

Under the latest guidance, individuals who buy a brand-new electric vehicle or plug-in hybrid electric vehicle meeting the Treasury Department's criteria are eligible for a reduction of $7,500 from the listed price of a new EV or a $4,000 decrease in the expense of a pre-owned EV.

Hyundai's Ioniq 6 is on display at the 2022 Los Angeles Car Show on November 18, 2022 in Los Angeles, California.

Josh Lefkowitz/Getty Images

Electric cars are now more affordable for all

According to Laurel Blatchford, Treasury's chief implementation officer for the Inflation Reduction Act, the recent legislation allows consumers to enjoy reduced prices on clean vehicles. This not only expands consumer options but also supports the growth of car dealerships. Blatchford further states that the IRS has made efforts to simplify the process for car dealers, demonstrating their dedication to improving service and ensuring that taxpayers receive the credits they are entitled to.

A range of new EV models, including their variations, qualify for either full or partial credits, with some exceptions for a few foreign-made vehicles. The majority of eligible cars are currently produced by top US EV automakers Ford, General Motors, Stellantis, as well as Tesla and Volkswagen. Additionally, an increasing number of foreign companies are establishing EV manufacturing plants in the US to capitalize on potential tax incentives in the coming years.

According to a study conducted by George Washington University in 2022, receiving consumer subsidies in advance could be a crucial factor in encouraging more individuals to purchase electric vehicles (EVs). The study surveyed over 2,000 car buyers in the United States and revealed that the majority preferred upfront rebates rather than waiting to claim credits through tax filings. This preference was particularly evident among lower-income households, buyers of used vehicles, and individuals with limited budgets.

As part of their efforts, the Biden administration is currently reaching out to dealers, providing them with information on how to register with a new federal website for the purpose of offering upfront tax credits to consumers in the future. According to a press release from the Treasury, car dealers will receive reimbursement from the government within 72 hours of selling the vehicle.