While buyers have long been able to receive a tax credit of up to $7,500 when they purchase a new electric vehicle, they have had to wait until tax time to see that money. Starting in January, the IRS says that buyers will be able to get their credit within three days of purchasing their new vehicle.
That comes after months of talks between federal regulators and the National Automobile Dealers Association (NADA) to find guidance on how to apply credits faster. They have determined that the reimbursement of buyers will be handled through registered dealerships.
Starting in 2024, dealers that are registered via a website called IRS Energy Credits Online will be able to submit EV sales information to the IRS. They will then be able to receive payments for transferred credits, which they can apply to the purchase price of a new or used vehicle or as cash to the buyer.
Read: American Buyers Can Now Get Up To $4,000 Used EV Credit, Here’s How
As you would expect with a system trading in thousands of dollars at a time, there will be some limits on what can be done. For instance, if a buyer asks for their $7,500 credit in cash, they must get the full amount in cash, not just a portion of it.
In addition, dealers will provide buyers with disclosures, and will have to complete an electronic time-of-sale submission. Dealers will also be required to submit information during the registration process to ensure that they are tax-compliant and to prevent fraud.
The credits will just be passing through dealers’ hands, and will not be counted toward their gross income. However, consumers will be able to apply the credit amount towards their down payments, reports Autonews. If a buyer’s income means they are not eligible for the credit, but they take it, they will have to repay in full come tax time.
“These are positive developments and aligned with two major priorities that NADA stressed to Treasury would be needed for successful implementation of the clean vehicle tax credit program in the showroom,” Mike Stanton, CEO of the NADA said. “The information Treasury released Friday should allay the biggest dealer concerns.”
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