Tax Credit Rules for Low-Price EVs, and the “Cash for Clunkers” Program: Reducing the Price of an EV to 7,500
The new guidance gives dealers the power to reduce the price of an EV by as many as $7,500 at point of purchase rather than waiting for the customer to file their taxes to claim the credit.
The old rules meant that if a person paid full price for a new EV, they had to wait until the next time they file tax returns to get a tax credit of up to $7,500 for a new EV.
The George Washington University study found that car buyers preferred to receive the credit immediately.
The credit can either be applied at the time of purchase, or used as cash to give the buyer the incentive to buy. To apply the credit, dealers will have to register through an IRS portal. Buyers will have to tell dealers if they fall in line with income limits outlined in the tax credit rules.
Some dealers have expressed concerns about having to foot the bill for customers while they wait for the government to pay them back. They worry about a repeat of the so-called “Cash for Clunkers” program in which dealers offered a cash rebate to owners who traded in older, less efficient vehicles. At the time, dealers complained about not receiving repayments in a timely fashion.
This time will be different, the IRS promises. According to the guidance, most dealers will receive repayment for the rebate within 72 hours and will be able to track the progress in real time through an online portal.
EV Buyers’ Choice: Tax Credits in a Complex Economy of U.S. Retail Chains and the Problem of Income Caps
That means that an income cap still exists for buyers and there are limits to how much can be spent on a car in order to get the credit. And not all models from automakers will qualify because of complex rules about how the cars are produced, including where the battery components come from.
Though this will simplify things for EV shoppers, the tax credits still remain complicated as the government juggles both encouraging people to buy EVs while also pushing car companies to move more of their supply chains to the U.S.
Low- and middle-income families owe less than that in taxes, which made that an income minimum. It was not only a hassle for people to figure out how much the credit was worth but it was also a hassle for them to figure it out.
Buyers can qualify under the income cap using either the current year’s income or the previous year’s, whichever is lower. If their income was over the cap in both years, they would have to repay the tax credit they received.
The adjusted gross income for individual is $150,000, $225,000 for a head of household is $250,000 and $300,000 for a married couples filing joint or surviving spouses is $150,000.
The vice president of the electric vehicle practice at auto data giant, says that the changes will make a tremendous difference. At the time of the transaction, you can finance at a lower price and increase monthly payments, but you have to wait for a tax refunds down the line.
