A small rule change in 2024 could save you big money on your EV purchase.

If you’re considering buying an electric car, there are new rules coming in 2024 that could make it easier to save money. Starting January 1, 2024, electric vehicle (EV) buyers will be able to claim the EV tax credit at the point of sale at their dealership.

Let’s take a look at what these new rules for EV tax credits mean and how they could help people save money on their EV purchase.

New rules for 2024: Get an EV tax credit at your dealership

The federal government is offering an EV tax credit for new or used electric vehicles as part of the Inflation Reduction Act. Depending on which car you buy, you can get a tax credit of up to $7,500 for a new EV, or up to $4,000 (or 30% of the sale price, whichever is less) for a used EV.

But unlike some tax credits that require you to wait until you file your taxes to see your money, the EV tax credit is now easier to obtain in one important way. New IRS regulations require that starting January 1, 2024, the EV tax credit (“clean vehicle tax credit”) must be approved and begin at the time of vehicle sale. That means you can get the EV tax credit right away when you buy the car, like an instant rebate.

This new IRS rule makes it much easier to get an EV tax credit because you don’t have to wait for the dealer to file your taxes and submit documentation showing what tax credits your EV qualifies for. The EV tax credit applies to the purchase price of the car. Since dealerships have to register with the IRS and process paperwork, it helps you understand which cars qualify for how much tax deductions.

How the EV Tax Credit Works for New Cars

Some of the EV tax credits can be complicated, especially for newer EVs. As of 2024, not many new EVs will qualify for the full $7,500 tax credit. That’s because the credit is available only to vehicles that are finally assembled in North America and use battery materials sourced from the United States or certain U.S. trading partner countries. The maximum MSRP of your car must be:

• $80,000 for pickup trucks, SUVs, and vans
• $55,000 for other electric vehicles

And your income (modified adjusted gross income) must be up to $300,000 for married filing jointly, $225,000 for head of household, and up to $150,000 for all other filers.

If you’re confused about which cars qualify for the new EV tax credit, these new rules regarding dealer instant tax credits may help. Because it’s in the dealer’s best interest to help you get the right amount of EV tax credits. And some automakers are offering generous dealer discounts that qualify for the EV tax credit, even if your car doesn’t qualify. Car insurance can be more expensive for new EVs, so getting a bigger discount on a new EV could be a good financial option.

For example, as of mid-January 2024, several automakers such as Cadillac, Hyundai, and Kia are offering special incentives and discounts of up to $7,500 per electric vehicle. Even if the EV you choose isn’t eligible for the new EV tax credit, your automaker or local dealer may lower its price accordingly.

How the EV Tax Credit Works for Used Cars

The EV tax credit for pre-owned (used) cars is lower than the $7,500 limit for new EVs, but may be easier to obtain and understand. To get a tax deduction for a used EV, it doesn’t matter where the car was made or where the battery parts come from. Instead, whether you qualify for the used EV tax credit depends on:

• Your Income (Modified Adjusted Gross Income): Your income must be less than $150,000 if married filing jointly, $112,500 if head of household, or $75,000 if filing other returns.
• Car price: EV sales price must be less than $25,000.
• Manufacturer and Model Year: Your EV must be at least two years older than the current year. So the latest EVs currently eligible are the 2022 models.

The used EV tax credit is up to $4,000 or 30% of the sale price of your used EV, whichever is less. So, if your used EV sells for $10,000, you can get a tax deduction of $3,000. If your used EV sells for $16,000, you’ll only get a $4,000 tax credit. These tax credits can help reduce the cost of EV ownership, but get a quote for insurance before you commit.

gist: Receiving an EV tax credit with an immediate discount at the dealership could be a valuable advantage when purchasing a new or used EV in 2024. Getting the EV tax credit is now more convenient, even if not all vehicles qualify. And some automakers are offering generous discounts on EVs to match the new EV tax credit. Whether it’s a tax credit or a big discount, EV prices could drop in 2024. Before buying an EV, check out price quotes from the best car insurance companies.

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