With the year 2024 just around the corner, there are new developments and challenges in the realm of electric vehicle (EV) tax credits that potential buyers need to be aware of. The $7,500 tax credit for new electric vehicles is set to undergo changes that will impact how consumers can claim it. In this article, we will explore the upcoming dynamics and the implications they hold for prospective electric car buyers.
Easier access to tax credit: What's changing in 2024
In 2024, claiming the federal tax credit for purchasing an electric vehicle is expected to become more streamlined and accessible. This positive change arises from a policy that will allow car dealers to facilitate the transfer of the EV tax credit to consumers at the point of sale, offering it in the form of cash, a price discount, or a deposit. Previously, individuals had to await the filing of their annual tax return to avail of this benefit. With this new mechanism, consumers will be able to seamlessly utilize their federal tax credit towards the purchase of both new and used EVs.
Moreover, the upcoming shift will enable consumers to become eligible for the tax benefit regardless of their tax burden, thus improving accessibility to the credit. This change is expected to make electric cars more affordable for a broader spectrum of consumers.
Why claiming a $7,500 EV tax credit could be harder
Conversely, amidst the ease of claiming the tax credit, there are shaping challenges for those seeking to leverage this credit. The Inflation Reduction Act, signed into law by President Joe Biden, is resulting in production requirements that aim to strengthen domestic EV supply chains. As a result, some EVs may not qualify for the full or partial tax credits due to the ongoing efforts of automakers to comply with these regulations. The effects of these rules will primarily impact the availability of new
electric vehicles, potentially limiting options for consumers.
Furthermore, EVs whose battery components are manufactured or assembled by certain entities designated as “foreign entity of interest” – including China, Iran,
North Korea, and Russia – will not be eligible for the tax credit. This criterion reinforces the expectation of a reduced availability of electric vehicles, particularly the more affordable ones.
Caveats to consider
As the dynamics of the EV tax credit undergo changes in 2024, there are several factors that potential buyers should take into consideration. Not all dealers may participate in the facilitation of the tax credit at the point of sale, though it is anticipated that the majority will do so. Therefore, it is advised for consumers to confirm with their dealer beforehand.
Another crucial consideration is the necessity for buyers to file an income tax return for the year in which they transfer their EV tax credit to a dealer. Additionally, there are specific eligibility requirements for both the vehicles and the consumers. These requirements encompass factors such as household income, differing rules for new and used electric vehicles, and income limits for married couples filing joint tax returns.
Conclusion
In conclusion, the year 2024 is expected to bring both opportunities and challenges for individuals seeking to benefit from the $7,500 tax credit for new electric vehicles. While the process of claiming the tax credit is set to become more accessible and consumer-friendly, there are looming challenges pertaining to the availability of qualifying EVs under the evolving production requirements. It is essential for potential buyers to stay informed about these changes and carefully evaluate their options in light of the shifting landscape of electric vehicle tax incentives.
Source: CNBC
