New year, new rules: As of January 1, things are about to get a little easier when it comes to getting your federal tax credit for buying an electric vehicle. Now the rebate – which is up to $7,500 for new EVs that qualify and up to $4,000 for used EVs that qualify – is available immediately when you purchase your car, rather than needing to wait potentially months to file a claim with your tax return. And auto dealers are signing up in droves with the IRS.
To help gear up for the insta-credit program, more than 7,000 car dealers have signed up with the Internal Revenue Service to ensure they can offer the point-of-sale rebate to EV buyers starting January 1 – that accounts for nearly half of all new car dealerships in the US, reports Automotive News.
On paper, at least, EV buyers pay a reduced fee upfront while the dealer handles the paperwork with the IRS, and then the EV buyer happily gets behind the wheel and drives away.
Of course, the number of vehicles that qualify for the full rebate, or any rebate, will shrink starting January 1 as well, as President Biden’s new restrictions on electric vehicles and battery sourcing will kick in. To qualify at all, vehicles have to be manufactured in North America with an MSRP under $80,000 for an SUV and $55,000 for a standard or smaller car.
Vehicles can qualify for a federal tax credit of $3,750 if automakers adhere to specific guidelines on sourcing battery materials. To get the rebate, 40% of the value of critical minerals used in the battery need to be extracted or processed in the US or in a country that is a US free trade agreement partner, or they must have been made from recycled materials in North America. Also, a vehicle will qualify for an additional $3,750 if 50% of the value of critical battery components are manufactured or assembled in North America. Those percentages will go up every year until the credit expires in 2032. Additionally, all EVs that contain any battery components from a foreign entity of concern (as in China) will be excluded in 2024, and that rule applies to battery minerals as of 2025.
Automobile dealers have, of course, been highly vocal opponents of the transition to electric vehicles for a host of financially driven reasons – some of them, of course, justified if you didn’t care at all about carbon emissions. EVs require less maintenance, meaning a cut in after-sales profits; staff needs to be educated on how to chat up customers about batteries and range; charging infrastructure needs to be installed, and so forth. Last month, nearly 4,000 car dealerships in the US wrote a letter to President Biden pleading that the government put the brakes on its adoption of EVs, saying customers aren’t interested in buying them and that electric vehicles are piling up on their lots – which left out the detail that new vehicles of all types are piling up as well. So yeah, opposition has been fierce. But maybe this new strategy will shake things up and give dealers a morale boost. It’s an easy incentive for customers to choose an electric vehicle, and this could help move some inventory around to free up space for new vehicles.
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