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From next year, electric car buyers can claim their tax credits at the time of purchase.
Changes to how car buyers can qualify for a federal tax credit for EVs — part of the Inflation Act — were announced Friday by the Biden administration and are being rolled out to car dealerships before they take effect Jan. 1.
under New guidanceUnder Treasury Department guidelines, buyers of a qualifying new electric vehicle or plug-in hybrid electric vehicle can deduct $7,500 off the sticker price of a new EV or $4,000 off the price of a used EV.
“For the first time, the Inflation Reduction Act allows consumers to lower the price of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses,” said Laurel Blatchford, Treasury’s chief enforcement officer for the Inflation Reduction Act. In a statement. “The IRS is focused on streamlining this process for car dealers as part of a commitment to improve service and help taxpayers claim the credits they deserve.”
More than a dozen new EV models and some of their variants are eligible for all or half of the new credit. A small number of models, mostly foreign-made vehicles, are currently ineligible. Most of the cars that have qualified so far are made by the “big three” EV automakers in the U.S. — Ford, General Motors and Stellar — plus Tesla and German automaker Volkswagen.
Many foreign companies are building EV factories in the US to take advantage of future tax incentives.
A 2022 George Washington University study found that getting consumer subsidies could be a key piece of the puzzle to getting more people to buy EVs. Researchers surveyed more than 2,000 U.S. car buyers and found that the majority would prefer to get a refund instead of waiting to file their taxes and get a loan. The researchers found that the preference was even higher for low-income families, used-vehicle buyers and those with tighter budgets.
The Biden administration is currently contacting dealers with information on how to register on a new federal website, eventually offering pre-tax credits to consumers. According to a Treasury press release, car sellers will be reimbursed by the government within 72 hours of selling the car.