The new year has brought a new plan for EV shoppers in the US: on-the-spot tax rebates. With auto dealers handling paperwork and waiting for reimbursement from the government, the process of purchasing an electric vehicle becomes more accessible and convenient.
- US government pays out $135 million to auto dealers in new EV tax rebate program
- $135 million already distributed to dealers since the start of the year under the new program.
- Tax credit is tiered based on sourcing battery materials and components in North America, with stricter rules for foreign entities from 2025.
US EV Shoppers Get Instant Tax Rebates
Initiative for electric vehicle (EV) shoppers in the US offers instant tax rebates at the time of purchase, with auto dealers handling the paperwork and waiting for reimbursement from the government. The program, which began in January 2024, has already distributed $135 million to dealers, according to the US government.
Under the previous system, buyers could only claim the 4,000 for used EVs) when filing their tax returns the following year. Now, EV buyers have the option of transferring those credits to auto dealers during the sale, reducing the overall price of the vehicle and leaving the paperwork and wait time to the dealer.
As of February 2024, the Internal Revenue Service has received over 25,000 time-of-sale reports, with more than 78% including advance payment requests, totaling $135 million paid to dealers since the start of the year. According to Deputy Treasury Secretary Wally Adeyemo, there is strong demand for the new upfront discount, which will help expand the EV industry in the United States.
The updated program includes 17,500 orders for new EVs and 2,000 for used vehicles. Additionally, over 11,000 auto dealers in the US have registered for the program, with more than 8,000 signed up for advance payments.
However, due to recent restrictions on electric vehicles and battery sourcing, fewer models qualify for rebates. To be eligible, vehicles must be manufactured in North America with a maximum MSRP of $55,000 for standard or smaller cars. Furthermore, consumers must meet income limits to qualify for the tax credit, or they must repay the government when filing their taxes.
Starting from 2024, the federal tax credit is tiered based on sourcing battery materials and components in North America. To qualify for the full $7,500 rebate, 40% of the critical minerals used in the battery must be extracted or processed in the US or a US free-trade agreement partner country, or they must be made from recycled materials in North America. Additionally, 50% of the critical battery components must be manufactured or assembled in North America, increasing every year until the credit expires in 2032.
All EVs containing battery components from a foreign entity of concern, such as China, are now ineligible for the rebate, and this rule applies to battery minerals as of 2025. As of January 1, the number of eligible EV models has dropped from 43 to 19, but Volkswagen’s ID.4 EV has recently regained eligibility.
