A previous blog post reported on the proposed rulemaking related to certain clean vehicle tax credits as established by the Inflation Reduction Act of 2022. (refer to an earlier post for a refresher on what the clean vehicle credit looks like and if you might qualify) This post focuses specifically on how buyers can transfer their new or used clean vehicle credits to registered dealers, starting on January 1, 2024.
Transfers of the new clean vehicle credit, which is worth up to $7,500, and the previously-owned clean vehicle credit, which is worth up $4,000, were provided in the Inflation Reduction Act. To qualify for the credit, the taxpayer must fall within the adjusted gross income guidelines and be purchasing a vehicle within the price guidelines (e.g., $80,000 for vans, SUVs and pickup trucks, $55,000 for sedans and others). Exclusions also apply for vehicles that source battery components or critical minerals from foreign entities of concern.
Under the proposed regulations, buyers of eligible clean vehicles can transfer credits to a registered dealer in return for a cash payment or having the credit treated as a partial payment or down payment on the vehicle in 2024. The credit transfers allow vehicle buyers to lower their purchase price at the point of sale, rather than having to wait to claim the credit on their tax returns the next year. The IRS expects to issue advance payments to dealers in the amount of the transferred credit within 72 hours of the purchase and the dealer’s submission of required information including in a “time of sale” report.
The proposed regulations also provide eligibility rules for the previously owned clean-vehicle credit that would give consumers more certainty regarding their ability to claim and to transfer the credit. Eligible consumers may transfer the full value of the new or previously owned vehicle credit regardless of their individual tax liability, as provided under Rev. Proc. 2023-33.
Rules regarding who is eligible to elect to transfer the credit to the dealer and under what circumstances these taxpayers may have to pay back, or recapture, some of the transferred credit have also been clarified under the proposed regulations. They further include safeguards against fraud or abuse, and explain the federal income tax treatment of the transferred credit and advance payment.
Additionally, the IRS recently issued IRS Fact Sheet 2023-22, which provided updated FAQs related to new, previously-owned and qualified commercial clean vehicle credits. Additional information can be found on the related website page.
If you need assistance determining eligibility for the clean vehicle tax credit or other tax savings opportunities, please contact your GYF Tax Executive at 412-338-9300.
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