Cash in Hand Option for New EVs: An Improved Acceleration Program for Vehicles with Fast Tax Credits (CASH FOR CLunkers)
Starting in January, EV car shoppers won’t have to wait until tax season to pocket the incentive, worth up to $7,500. The cash in hand option will allow for the credit to be made available regardless of the tax bill of the customer.
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.
A George Washington University study found that the majority of car buyers prefer to receive the credit as an immediate rebate.
In exchange for the tax credit transferring to the dealership, the dealer will give them cash or a down payment on the vehicle. The dealer will submit documentation to the IRS, and the IRS says dealers will be reimbursed “promptly” — within 72 hours or so.
Some dealers have concerns that they have to pay the bill for customers while they wait for the government to pay them back. They worry that there could be a repeat of the Cash for Clunkers program, in which dealers gave owners a cash payment to trade in their less efficient vehicles. The dealers didn’t get their 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.
The Income Cap for a New EV, And It’s Going To Be Repaid: Customer Concerns About The EV Tax Credit
That means there’s still an income cap for buyers and there are limits to how much cars can cost to qualify for the credit. Not all models from the automakers will be eligible due to the complex rules about how the cars are manufactured, including where battery components come from.
It addresses a major customer concern. The EV tax credit is complicated and can be confusing for buyers, so they have to do lots of homework if they wish to get one.
That functioned like an income minimum, since many low- and middle-income families owe less than that in taxes. It was a problem for people to figure out how much the credit was worth.
The current year’s income or the previous year’s is used to determine if you qualify under the income cap. If they realized that they were over the cap, they would have to repay the tax credit they received through a dealership.
The income limits for a new vehicle are $150,000 adjusted gross income for an individual, $225,000 for a head of household and $300,000 for a married couples filing jointly or surviving spouses.
The change will make a tremendous difference according to Elizabeth Muser, the vice president of the electric vehicle practice atJD Power. At the time of the transaction, that’s $7,500 and then at the end of April, you’re going to get your tax money back, which makes it even more important to have that financing at a lower price.