For those interested in new electric vehicles (EVs), the old federal tax credit will come to an end on September 30th. However, the IRS has released guidance suggesting that buyers can still qualify for the new tax credit even if their vehicle is delivered later, as long as they sign a binding contract and make a payment before the deadline.
In the past, eligibility hinged on the actual delivery date. So, if someone signed a contract by September 30th but faced a delay that pushed delivery into October, they’d risk losing out on the credit.
According to the IRS, as long as the buyer owns the vehicle and has a signed contract and payment, they can still receive the credit. This new approach lowers risks for buyers who might be close to the deadline.
“This added flexibility is particularly beneficial for those purchasing vehicles from out of state or who need shipping, as delays could mean missing the deadline,” I’ve heard from various shoppers.
How to qualify for Clean Vehicle Credit
The Inflation Reduction Act of 2022 has extended the federal EV tax credit—now called the clean vehicle credit—until 2032, with some new requirements regarding revenue, pricing, and manufacturing. However, previous tax incentives introduced by former President Trump will end on September 30th.
In order to qualify for the credit, models must be assembled in North America and meet specific battery component and critical mineral requirements.
Buyers also need to be aware of income limits: joint filers must earn under $300,000, while single filers should stay under $150,000. For used EVs, the limits are lower: $150,000 for joint filers and $75,000 for single filers.
Price caps are in place as well: SUVs, vans, and pickups are capped at $80,000, while newer cars must be under $55,000. For used EVs, the car must be at least two years old and priced under $25,000.
What buyers can do now
Starting in 2024, eligible buyers will be able to apply credits at the point of sale, reducing the need to wait for tax returns. Dealers must verify vehicle eligibility through the IRS, but buyers still have to ensure they meet income restrictions.
If you plan on buying before the deadline, it’s wise to ask the dealer for a written purchase agreement and to document your deposit or trade-in before September 30th. Keeping a copy of your signed contract and payment receipt is also a good idea.
It’s essential to note that buyers who do not make a down payment, like those opting for promotional financing, may not qualify for the credit, as mentioned by experts.
Another option to consider is leasing. Leased EVs are treated as commercial purchases, so they can bypass income and procurement restrictions, enabling dealers to apply a $7,500 credit to nearly any EV and pass on the savings to buyers, regardless of income or battery compliance.
