EV buyers will get an instant rebate of as much as $7,500 starting in 2024

The Treasury Department released new guidance Friday outlining how car dealers can give customers instant access to the electric vehicle rebate starting in January 2024. It’s the latest move by the Biden administration to bring down the cost of EVs in the hopes that more people will buy them.

The new guidance lays out how dealers can effectively reduce the price of an EV by as much as $7,500 at the point of purchase rather than the customer having to wait until they file their taxes to claim the credit.

The administration hopes that by applying the credit immediately, more people will be convinced to consider an EV for their next purchase, which will help toward achieving the goal of making EVs 50 percent of new car sales by 2030.

The electric vehicle tax credit — also known as the “clean vehicle tax credit,” or 30D, if you like IRS code — can offer up to $7,500 off the purchase of a new EV. The credit was approved as part of the Inflation Reduction Act of 2021, which was billed as President Joe Biden’s major effort to fight climate change.

Under the previous rules, a person would pay full price for a new EV, then wait until the next time they filed their taxes to apply to receive a nonrefundable credit of up to $7,500 for a new EV and $4,000 for a used one.

But a study from George Washington University found that many car buyers, especially those who were low-income, overwhelmingly preferred to receive the credit as an immediate rebate.

Now, dealers can apply the credit at the time of purchase — effectively making it a discount — or provide the rebate to the buyer as cash. Participating dealers will have to register through an IRS portal to apply the credit at the time of purchase. Buyers will have to confirm to dealers that they fall within the income limits outlined in the tax credit rules before accepting the rebate.

According to the IRS:

A dealer can provide a purchasing taxpayer with a financial benefit in cash or in the form of a partial payment or down payment for the purchase of the vehicle. The taxpayer benefits by receiving an immediate financial benefit at the time of sale, rather than having to wait to file a tax return and claim the credit. 

Some dealers have expressed concerns about having to foot the bill for customers while they wait for the government to pay them back. They worry about a repeat of the so-called “Cash for Clunkers” program from 2009, in which dealers provided a cash rebate to owners trading in older, less efficient vehicles. At the time, dealers complained about not receiving repayments in a timely fashion.

This time will be different, the IRS promises. According to the guidance, most dealers will receive repayment for the rebate within 72 hours and will be able to track the progress in real time through an online portal.

EV advocates praised the new rules, arguing they will help simplify what was previously a more complicated process. “This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale,” Albert Gore, executive director of the Zero Emissions Transportation Association, said in a statement. “A simplified process will maximize the benefit of these credits, not just to drivers and their communities, but to the entire EV supply chain.”