To further encourage car shoppers to choose electric vehicles, the government has changed the EV tax credit for 2024. Currently, eligible EV buyers have to wait until they file their tax returns to get the credit, which can cause a delay of months. This policy changes in the revised EV tax credit program starting in January 2024. EV buyers will receive up to $7,500 off the purchase price of their electric vehicle at the dealership—no waiting required¹. Dealership owners must keep these changes in mind as they may affect the demand for electric vehicles going forward. 

How Does the New EV Tax Credit Affect Car Buyers?

The new EV tax credit policy aims to make it easier for car buyers to take advantage of the program. Instead of having to wait and figure out how to file for the EV credit during tax season, these changes allow them to receive the rebate immediately at the point of sale.

The current policy also makes it so buyers can only receive the tax credit if their federal tax liability is equal to or more than the credit they are eligible for. For example, if a buyer is eligible for a $5,000 EV credit but only owes $3,000 in federal taxes, they would only receive a $3,000 credit².

These complications no longer exist under the new policy. Starting January 1, 2024, consumers purchasing eligible new EVs will receive up to $7,500 off the price tag and up to $4,000 off the price tag for used electric vehicles. For a fully eligible new electric vehicle with a sticker price of $60,000, for instance, the buyer would only pay $52,500³. 

Should EV Shoppers Buy Now or in 2024?

With upcoming EV tax credit program changes, buyers interested in electric vehicles may wonder whether they should buy now or wait for the new incentive to go into effect. Depending on their circumstances, either option can be suitable. However, buyers who don’t want to wait until they file their tax returns or those who may have a federal tax liability below the credit amount should wait until the new policy takes effect on January 1, 2024. 

Customer and Vehicle Qualifications for the New EV Tax Credit

The new EV tax credit does not apply to every electric vehicle purchase. Customers hoping to get the credit must meet specific qualifications and make sure to choose an eligible electric vehicle. 

Customer Qualifications

To qualify, shoppers must meet the following⁴:

• Purchase the electric vehicle for individual use, not for resale
• Use the vehicle primarily within the United States
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• Have a modified adjusted gross income below:
• $300,000 for married couples filing jointly 
• $225,000 for heads of households
• $150,000 for all other filers

Vehicle Qualifications

To qualify for the EV tax credits, the purchased vehicle must⁴:

• Have an MSRP below $80,000 for vans, sport utility vehicles and pickup trucks and $55,000 for remaining vehicle types
• Go through final assembly in North America
• Be produced by a qualified manufacturer
• Have a battery capacity of at least 7 kilowatt hours
• Have a gross vehicle weight rating of less than 14,000 pounds

In addition to these requirements, bear in mind that the EV tax credit is split into two pieces: a critical mineral requirement and a battery components requirement. Buyers will receive $3,750 if the electric vehicle they purchase meets just one of these components and the full $7,500 only if the vehicle meets both⁴. 

Used Vehicles That Qualify for the EV Tax Credit

Some examples of new vehicles that qualify for the full EV federal tax credit include⁵:

• Chevrolet Bolt
• Chevrolet Silverado EV
• Tesla Model 3
• Tesla Model X
• Tesla Model Y
• Ford F-150 Lightning
• Lincoln Aviator

These and other electric vehicles may also be eligible for state and local tax credits for EV buyers. 

But there’s good news for used car buyers: As of 2023, the IRS also has a tax credit for used EVs that applies to customers who haven’t used a clean vehicle credit in the past 3 years. These vehicles must be at least two model years older than the year of purchase and be priced at $25,000 or less, excluding taxes and other fees⁶. Buyers can visit FuelEconomy.gov to find out whether a specific used vehicle is eligible for this credit. 

Build Your High-Quality Electric Vehicle Inventory

With these changes, dealerships should anticipate possible increased demand for electric vehicles in 2024. Source high-quality electric vehicles to fill out your inventory and keep up with demand through ACV auctions. Get started today.  

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Resources:

1. Ebeling, A. (10 October 2023). EV Buyers Can Get Instant $7,500 Tax Credit Starting in 2024. Wall Street Journal. Retrieved 17 November 2023, from https://www.wsj.com/personal-finance/irs-revs-up-tax-credit-for-buying-evs-59b845d 
2. Iacurci, G. (15 October 2023). The ‘bummer’ of the $7,500 electric vehicle tax credit: Its full value may be hard to get. CNBC. Retrieved 17 November 2023, from https://www.cnbc.com/2022/10/15/the-7500-electric-vehicle-tax-credits-full-value-may-be-hard-to-get.html 
3. Iacurci, G. (10 October 2023). Treasury Department aims to make it easier to get $7,500 EV tax credit in 2024. CNBC. Retrieved 17 November 2023, from https://www.cnbc.com/2023/10/10/7500-ev-tax-credit-may-be-easier-to-get-in-2024-per-treasury-rule.html 
4. (6 November 2023). Credits for new clean vehicles purchased in 2023 or after. Internal Revenue Services. Retrieved 17 November 2023, from https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after 
5. Barry, K. (29 September 2023). Electric Cars and Plug-In Hybrids That Qualify for Federal Tax Credits. Consumer Reports. Retrieved 17 November 2023, from https://www.consumerreports.org/cars/hybrids-evs/electric-cars-plug-in-hybrids-that-qualify-for-tax-credits-a7820795671/ 
6. Credits for new clean vehicles purchased in 2023 or after. IRS. Retrieved 6 December 2023 from https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after