Customers in the market for a used or new electric vehicle (EV) in 2024 are in luck.Â
Before this year, buyers had to wait to claim the clean vehicle credit (CVC) on their tax return. Now, you can lower the upfront cost of an EV by transferring the credits to the car dealer. If you meet the eligibility requirements, you could save up to $4,000 on pre-owned and up to $7,500 on new electric vehicles.Â
Which Vehicles Qualify for the Tax Credit?
The tax credits apply to qualifying all-electric, plug-in hybrid, and fuel-cell electric vehicles (FCV) for personal use. This government website identifies each vehicle’s specific make and model, and details the various tax incentives available for these vehicles.Â
Dealerships also provide reliable documentation, which specifies whether a vehicle meets the requirements for the tax credit programs. Most manufacturers are expected to use tax credits as sales incentives, so dealers make it easy to identify the applicable tax credits for the vehicles on their lots.Â
Eligibility Requirements for New Vehicle Purchases
Eligibility depends on several factors: the vehicle’s MSRP, its final assembly location, critical minerals, battery components, and adjusted gross income. The table below details these requirements.Â
Dealer Documentation
You must also obtain specific documentation from the registered dealer no later than at the time of sale, including:Â
- A written disclosure with the MSRP of the new clean vehicle or the sale price of the previously owned clean vehicleÂ
- The maximum amount of the allowable tax credit and any other purchase incentivesÂ
- The amount the dealer provides you as a condition of you transferring the tax creditÂ
If you’re buying a previously owned clean vehicle, the registered dealer must also give you:Â
- Certification that the model year of the vehicle is at least two years before the calendar year of saleÂ
- Certification that the vehicle has not been transferred to anyone other than the previous owner since Aug. 16, 2022Â
- A copy of the seller report and confirmation that the dealer successfully submitted that report through this IRS website
A Word of Caution
You can use the tax credit when buying your electric vehicle. However, if you don’t meet the eligibility requirements, you’ll have to pay the credit back in full when filing your income tax return for that year. If you’re unable to do so, you may also owe interest and penalties until you’ve repaid the credit in full. The rate of penalties and interest assessed may be higher than the interest rates you would originally have paid to finance the vehicle.Â
Dealers have their own requirements. To accept a customer’s tax credit at the time of purchase, a dealer must register with the IRS Energy Credits Online portal. You may run across dealers who haven’t completed this registration and can’t provide the value of the tax credit when you’re ready to buy. If this occurs, you’ll need to either find a different dealership or wait until you file your tax return to claim the tax credit.Â
Stay Ahead of the Curve with Aldrich
Claiming the EV tax credit upfront is a financial plus. But it can be difficult to determine if you qualify and ensure you have the necessary papers for the tax credit. If you have questions about the credit or your personal tax liability, let’s talk.