The United States Treasury Department released new proposed guidance on Friday for electric vehicle tax credits that will put money back in buyers' pockets instantly.
Last year, Congress passed sweeping legislation for EV tax credits under President Joe Biden’s Inflation Reduction Act, which included major tax and climate measures promoting clean energy. The credits are part of a push by the White House to help achieve Biden's goal of making all new car sales 50% electric by the end of the decade.
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“For the first time, the Inflation Reduction Act allows consumers to reduce the up-front cost of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses,” Laurel Blatchford, Treasury’s chief implementation officer for the Inflation Reduction Act, said in a statement.
Beginning next year, buyers of new, clean vehicles can transfer federal tax credits to use at the dealership rather than waiting for a tax refund.
Starting in January 2024, buyers who opt to purchase a new vehicle can get up to $7,500 off the sticker price if they make less than $150,000 — or $225,00 for heads of households and $300,000 for married couples. Buyers of used electric vehicles can get $4,000 off a car priced at less than $25,000 if they make under $75,000 — or $112,500 for heads of households and $150,000 for married couples.
Under new guidance in April, the Treasury detailed sourcing updates for battery components and mineral contents must meet certain requirements and price caps to qualify for the tax credits. The Biden administration released updates for a small number of foreign-made vehicles that don't qualify, cautioning if battery parts come from a “foreign entity of concern.”
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More than a dozen models qualify for the full new vehicle credit, such as the Tesla Model 3 and Tesla Model Y, Ford F-150 Lightning, Chrysler Pacifica plug-in hybrid, and others. Certain models may only qualify for a partial credit.
“The IRS has focused on streamlining this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits they are eligible for,” Blatchford said.