Below we review the Electric Vehicle changes in January and what that means for dealers?

 

As part of the Biden-Harris Administration’s investing in America Electric Vehicle agenda, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) initiated the IRS Energy Credits Online portal on November 1, 2023. This strategic move is to implement a crucial provision of the Inflation Reduction Act for the electric vehicle industry. The portal will not only decrease the financial burden on consumers, but it will also serve as a growth engine for car dealers by broadening access to tax credits at the point of sale for both new and pre-owned eco-friendly vehicles.

Beginning January 1, 2024, the Inflation Reduction Act (IRA) will introduce a significant change to the clean vehicle credit system. Consumers will have the option to transfer their new clean vehicle credit—up to $7,500—and their previously owned clean vehicle credit—up to $4,000—to a registered car dealer. This provision essentially turns these credits into an immediate rebate at the point of sale, serving as an upfront down payment on the vehicle. As a result, the purchase price of the vehicle is effectively lowered, an advantageous alternative to waiting for a tax return the following year. However, it is essential to note that this benefit only applies to vehicles purchased under the consumer clean vehicle credits.

 

The new Energy Credits Online portal is set to revolutionize the credit transfer process for clean vehicles. This online platform allows registered dealers to submit sales information directly to the IRS, facilitating a near-instantaneous payment for transferred credits. Alongside this, dealers will also utilize the portal to submit “time of sale” reports. These reports are critical in verifying a vehicle’s eligibility for a credit, regardless of whether the buyer opts to transfer their credit to the dealer. By introducing Energy Credits Online, the IRS underscores its commitment to enhancing customer service and ensuring taxpayers can seamlessly access the credits and deductions for which they qualify. This digital platform is a testament to the IRS’s dedication to modernizing tax administration. Furthermore, it is instrumental in achieving the economic, energy security, and climate objectives underscored by the Inflation Reduction Act.

 

When a buyer chooses to transfer the credit, registered dealers will reduce the purchase price of the vehicle or provide cash to the buyer. The amount provided must equal the full amount of the credit available for the eligible vehicle. When completing the sale, the dealer will electronically submit information regarding the transfer, including a time of sale report, to receive an advance payment for the value of the credit. The IRS expects to issue advance payments within 72 hours. To provide clarity and certainty, the dealer will provide buyers with required disclosures as part of the credit transfer and electronic time-of-sale submission process and with written confirmation that the vehicle they’re buying is eligible for a credit and the credit amount. 

 

You can find more information about these credits and other deductions on the of the IRS website. It’s important to determine your eligibility for tax credits and deductions before you file. Credits can reduce the price of purchase, or it can reduce the tax income burden of the purchasers. Dealer can learn more and get set up today to begin 2024 as an authorized EV POS Dealer here: Register your dealership to enable credits for clean vehicle buyers | Internal Revenue Service (irs.gov)

 

Summary:

Thinking through the aged inventory dilemma we’re facing in the automotive industry today in the used car segment, and then adding the unique challenge of many vehicles being thousands of dollars underwater when they’re coming in for trade, we see an opportunity for these point of sale tax credits to help mop up some of that water and allow dealers to get consumers financed into a nice new used electric vehicle along with taking in a nice retailable trade in that transaction.

The buzz around cash on the hood by OEMs, and the federal government efforts to entice the public to move to EVs, will most likely be executed through big PR campaigns in the early part of 2024. If that happens don’t be a dealer who’s waiting on the sidelines to see how they can get into the game, get into the game now. Reach out to our team for more information HERE.

You can also visit our EV Resource Community HERE.

 

John Ellis CEO & Founder of The Automotive Advisor Team, LLC

Author: John Ellis

Founder & CEO The Automotive Advisor Team, Inc. BEVEveryting, Inc. Double E Consulting, Inc.

LinkedIn page

Leave a Reply