CLAIMING EV TAX CREDIT MUCH EASIER IN 2024

 

NEW RULES IN 2024 IMPROVE EV TAX CREDIT 

The U.S. Department of the Treasury is making it easier to claim an electric vehicle tax credit worth up to $7,500 starting in 2024, based on new guidance released in early October by the U.S. Department of the Treasury and the Internal Revenue Service (IRS).  Beginning in January, the Inflation Reduction Act Provision will enable Consumers to transfer their EV tax credit to the car dealer. 

What this means is that the dealer can apply that credit to the cost of purchasing your new EV. You get an immediate amount of money equal to the tax credit to apply to your down payment if you qualify for the EV tax credit. This replaces having to wait until you file your taxes to receive the benefit. Both New and Previously Owned clean vehicles can qualify for this benefit. This will result in a lower initial payment for consumers who want to get an EV. It will also help car dealers grow their "clean air" businesses.  

Under the Inflation Reduction Act, consumers can choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting January 1, 2024 for both electric vehicles and fuel-cell vehicles. Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit. Another significant change is that all eligible buyers get the full tax break, even if they don’t owe any federal taxes. Currently, tax filers receive only as much of the credit as they owe in taxes.

How to qualify for the credit if you buy a new EV

To qualify for the credit, you must buy the car at a dealership while satisfying requirements, including caps on income, how the vehicle will be used and specifications related to how the vehicle was made. In some cases, you might be eligible for a partial credit based on the type of car you buy and where it’s made.

The IRS’ website has a full list of requirements for new EVs and FCVs that you can read before buying an EV. See the details from the IRS by CLICKING HERE. Here’s a look at a few of the major requirements:

• Total annual adjusted gross income can’t exceed $300,000 for married couples, $225,000 for heads of household or $150,000 for single tax filers.
• The vehicle must be for your own use and used primarily in the U.S.
• The vehicle retail price cannot exceed $80,000 for vans, sport utility vehicles and pickup trucks, or $55,000 for all other vehicles.
• The vehicle must meet various standards for weight, battery capacity and final assembly location, as well as where battery components or critical minerals are sourced.

The U.S. Department of Energy also has a helpful tool that can show you if your car qualifies.

How to qualify for the credit if you buy a used EV

You can also qualify for a tax credit if you buy a used EV or FCV, for 30% of the sale price up to a maximum of $4,000.

The IRS’ website has a full list of requirements. Here’s a look at a few of the major ones:

• Annual adjusted gross income can’t exceed $150,000 for married couples, $125,000 for heads of household or $75,000 for single tax filers.
• You can’t be a previous owner of the vehicle or have claimed the credit three years prior to the purchase date. Additionally, you can’t be claimed as a dependent on another person’s tax return.
• The vehicle must be for your own use and used primarily in the U.S.
• The vehicle must have a sale price of $25,000 or less and be a model year that’s at least two years earlier than the year in which you bought it. That means a car purchased in 2023 would have to be a 2021 model or older.
• The vehicle must meet various requirements, including weight.

The U.S. Department of Energy has a helpful tool for used vehicles as well.

If you are considering getting an EV, consider shopping now at years end. You can order your vehicle for delivery after January 1, 2024 and may be entitled to a significant savings!

Call me at 773.620.2868 or email me at seth@castrocarguy.com to learn more.