IRS Allows Electric Vehicle Buyers to Claim $3,750 or $7,500 Tax Credit as Instant Discounts at Point of Sale

The Internal Revenue Service (IRS) and U.S. Energy Department have introduced updated guidelines allowing electric vehicle (EV) buyers to collect a federal tax credit of $3,750 or $7,500 as an instant discount at the point of sale for select EV models. This departure from the previous process, where buyers had to wait until filing taxes to claim the credit, aims to streamline the incentive and promote EV adoption. However, concerns about potential tax fraud and complications have been raised by tax experts.

Photo from: Money

Instant Discount vs. Tax Refund

Under the new guidance, EV buyers can choose to get the federal tax credit as a discount at the time of sale instead of waiting for a tax refund. This is a substantial change from the former approach, which applied the tax credit when filing taxes.

The adjustment is expected to make the purchasing process easier for purchasers and increase the attraction of electric automobiles.

Buyers must meet the income standards stated in the $740 billion Inflation Reduction Act, sponsored by Democrats, to be eligible for the instant discount. For married couples filing jointly in 2024, the adjusted gross income limitations are $300,000; for heads of household, they are $225,000; and for other tax filers, they are $150,00. Buyers are obliged to certify that they meet the standards; dealers are not obligated to confirm the income of buyers.

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Concerns of Tax Fraud and Complications

Despite the benefits of the instant discount program, tax experts, including Scott Hodge, president emeritus of the Tax Foundation, express concerns about potential tax fraud and errors.

Hodge highlights the risk of buyers understating their income to maximize the rebate at the dealership, leading to complications and investigations for the IRS after the fact. The immediate point-of-sale discount program is described as potentially creating challenges for all parties involved.

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