The Clean Vehicle Tax Credit — up to $7,500 for electric vehicles — can now be used at the point of sale like an instant rebate.
Effective this year, the changes may help steer more potential buyers toward EVs and away from gas-powered vehicles. “The tax credit — most Americans still aren’t aware of it,” said Loren McDonald, CEO of the analyst firm EVAdoption. “That’s why the point of sale [change] is important.”
But as of early 2024, the changes are a bit of a mixed bag for consumers. While the changes do mean you can save money immediately on an EV purchase versus waiting for your tax return, it limits your EV options, too. Price caps, income requirements, dealership participation and battery sourcing requirements have caused the 2024 list of eligible EVs to shrink — at least for now.
McDonald said that despite the stringent requirements, the EV market is still growing fast in the US, citing a 73% increase in EV sales for Mercedes last year; Tesla saw a 37.7% increase in sales, too. According to a recent CNET interview with the US Secretary of Energy, Jennifer Granholm, 1.4 million EVs were sold during 2023.
And while prices tend to be higher for EVs than for gas-powered cars, EV prices are falling. The average price for a new EV in December 2023 was almost $51,000, down almost 18% year-over-year, according to Kelley Blue Book data.
EV tax credit changes for 2024
The IRS updated its electric vehicle tax credit rules as of Jan. 1, which makes it easier to see immediate savings on an EV purchase. Practically speaking, buyers purchasing a new EV can claim a tax credit maxing out at $7,500, or $4,000 for a used car.
Perhaps the biggest and most important change is that EV buyers can now take advantage of that tax credit at the point of sale — meaning you’re effectively able to get up to a $7,500 discount at the dealership. Before the change, you would need to wait to see the benefits of that tax credit when you filed your taxes.
For example, if you purchased an EV in January 2022 and could qualify for the full $7,500 tax credit toward the purchase, you wouldn’t see the benefit of that tax credit until you filed your taxes in April 2023 — nearly a year and a half later. With this new change in effect, you can take the credit immediately, almost as if you have a $7,500 EV coupon, which may incentivize more buyers to choose an EV.
“The big thing that changed is that you have the ability to take the credit at the point of sale, and you’re essentially transferring it to the dealership and they’re getting reimbursed,” said Ronald Montoya, senior consumer advice editor at the automotive-focused site Edmunds. “It’s like a discount on the vehicle, as opposed to waiting until your taxes come up and taking it there.”
Whether you can fully take advantage of the entire tax credit, however, is a bit more complicated.
