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Changes are coming to the Inflation Reduction Act’s (IRA’s) electric vehicle tax credits in 2024. The IRS published a new proposed rule along with a new FAQ on the Transfer of Clean Vehicle Credits Under Section 25E and Section 30D. The new rules will make using the clean vehicle credit even easier and may generate more interest in the electric vehicle market which has experienced a softening demand. The FAQ document reveals one of the strongest advantages of the new rules stating that:
“The transfer election allows a taxpayer purchasing a new clean vehicle or previously-owned clean vehicle after December 31, 2023, to transfer the entirety of the allowable credit to an eligible entity (a registered dealer) in exchange for a financial benefit (i.e., reduced final cost) from the eligible entity equal to the amount of the credit, whether in cash, in the form of a partial payment, or down payment for the purchase of such vehicle. In short, the tax credit can be applied at the point of sale to reduce the cost of the purchase by the amount of the credit. Eligible taxpayers who purchase an eligible vehicle may choose to claim the tax credit on their return instead of transferring a new or previously-owned clean vehicle tax credit.”
This is huge from a practical standpoint because it allows consumers to apply the tax credit at the point of sale, meaning that consumers won’t have to wait until tax season to see the credit’s benefit. This makes EV price points even more attractive and reduces the risk of consumers buying a non-qualifying vehicle by mistake – not getting a credit they expected. The option to apply the tax credit at the point of sale will be available to consumers after December 31, 2023.
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