The EV Tax Credit Is Now Faster And Easier, But There's A Catch
No matter how you feel about electric vehicles (EVs), it is indisputable that they are better for the environment than internal combustion engine (ICE) vehicles. They are also quieter, more energy efficient, accelerate better, and require less maintenance. Plus, they typically have a lot of unique features that make the whole driving experience more enjoyable.
All available data suggests that the EV market will continue growing at a rapid pace. In 2024, it is expected to reach an impressive $623.3 billion in revenue globally. Governments around the world are partially responsible for this trend, as they provide various incentives to encourage the transition from gas-powered to electric cars.
The United States is no exception, with various federal and local initiatives. You may not be familiar with all of them, but if you're thinking about purchasing an EV, you've probably heard of the Clean Vehicle Tax Credit, which provides consumers with up to $7,500. Here's how it works, and what you need to know if you're looking to buy an electric car in 2024.
How the EV tax credit works in 2024
As of 2024, the Clean Vehicle Tax Credit can be used at the point of sale. Previously, you wouldn't see any benefits of the tax credit until you filed your taxes for the year in which you purchased the EV and got your tax return. In other words, the tax credit now functions essentially as a coupon. This is a monumental change for consumers and dealerships alike.
Under ideal circumstances, it's supposed to work like this: you find a dealership selling the EV you want to buy, file some paperwork, and $7,500 is knocked off the price. You don't have to deal with the Internal Revenue Service (IRS) or any other government agency, the dealership does that for you. They submit the appropriate documents to the IRS, which pays them back the $7,500 that was deducted from the actual price.
This certainly seems preferable to waiting for your tax return, especially considering that EVs are still more expensive than ICEs — a trend that is unlikely to reverse since they have been getting more expensive in recent years.
What's the catch?
Predictably, there is a catch. Or rather, there are several. You have to fulfill various criteria in order to qualify for the full $7,500 tax credit. For a start, your adjusted gross income cannot exceed $300,000 if you're married and file taxes jointly with your spouse. As a head of household, your annual income cannot be greater than $225,000. If you fall into any other filing category, your adjusted gross income must not exceed $150,000.
Not all vehicles qualify either. The EV needs to have a battery capacity of at least 7 kilowatt hours, weigh less than 14,000 pounds, meet battery requirements, and undergo final assembly in the U.S. The retail price of the car, meanwhile, cannot exceed $80,000 for pickups and SUVs, or $55,000 for other vehicle types. Plus, the dealership needs to be registered with the IRS and submit time-of-sale reports in order to participate in the program.
In principle, the 2024 Clean Vehicle Tax Credit should have a positive impact on EV sales. It's a step in the right direction, but it also seems more complicated than it should be. In any case, if you've decided to purchase an EV this year and count on receiving a tax credit, it would be wise to do a bit of research beforehand.