This is a fantastic idea and one that makes me wonder if I’ll be buying my first EV next year.
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Up until now, buying an electric vehicle qualified eligible buyers in the United States for a federal tax credit of up to $7,500 for new vehicles and $3,500 for used vehicles. While this has been a great way to encourage people to make the jump into an electric car, there was a big problem — you had to wait until tax season to actually get your money.
For a lot of people, whether or not they can afford a car comes down to one thing — can they afford the monthly payment? While there is certainly an argument to be made that this should not be the only thing you consider when buying a car (or a house, for that matter), the monthly payment is certainly one of the most important considerations when making such a purchase.
This is where the IRS comes in. As reported by The Verge, starting in 2024, instead of having to wait for tax season to redeem your $7,500 credit, you can now get that off the price of your car when you purchase or finance it. Dealers will be able to redeem the credit from the IRS directly and receive payment in three days.
The Inflation Reduction Act provides taxpayers with credits for qualified new and previously owned clean vehicles acquired and placed in service during the taxable year. Beginning Jan. 1, 2024, in certain situations, taxpayers will be able to transfer the new and previously owned clean vehicle credits to eligible entities.
Today’s guidance clarifies how taxpayers can elect to transfer new and previously owned clean vehicle credits to dealers who are eligible to receive advance payments of either credit. The proposed regulations and revenue procedure also provide guidance for dealers to become eligible entities to receive advance payments of new or previously owned clean vehicle credits.
This is a huge win for everyone. While dealers will need to trust that the government makes good on its promise to pay them their $7,500, it means that the price of entry into an EV just got even lower — at least in the monthly payments you’ll have to make for one. As someone who can’t pay a new car off all at once (I think that’s most people), I’ll certainly appreciate getting the rebate immediately when I get the car and being able to roll those savings into the monthly payment.
Albert Gore, executive director of the Zero Emissions Transportation Association, said in a statement that this new policy will benefit everyone, including those who want to buy an EV as well as the dealers who want to sell them. They expect sales of electric vehicles to accelerate once the new policy is in effect.
This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale. A simplified process will maximize the benefit of these credits, not just to drivers and their communities, but to the entire EV supply chain.”
Rivian recall: R1T Truck Image source: Rivian
Of course, there are still the prices of the EVs themselves that, in a lot of cases, still need to come down. Personally, I’m a fan of Rivian’s adventure vehicles. While I have a Subaru now, the Rivian R1T is my dream electric vehicle — especially as someone who loves to camp, go backpacking, and basically do anything outdoors.
However, the current starting price of a Rivian R1T is still over $70,000. While that immediate $7,500 sounds great, that doesn’t change things if the vehicle is still too expensive to buy anyway. That’s why I’m holding out for the long-rumored R2 platform from the company, which is expected to start at $40,000 — a huge leap and much closer to my personal expectation of what I’d be willing to pay for a car.
That vehicle isn’t expected until 2026, however, so we’ll see if this policy is still in effect by the time I go to buy that car. Maybe I should pick up a Tesla Model 3 in the meantime, especially since Tesla cut prices once again. In any case, buying an EV is getting even easier next year.
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