The high cost of electric vehicles (EVs) has been a “leading deterrent” for many consumers in the United States who are considering making the switch to sustainable transportation. A poll by The Associated Press-NORC Center for Public Affairs Research and the Energy Policy Institute at the University of Chicago found that six in 10 American adults said the high cost is a major reason they would not purchase an EV.
The Biden administration’s Inflation Reduction Act includes measures to address this issue, such as federal tax credits aimed at encouraging more Americans to embrace EVs. However, it became evident that consumers do not want to wait months to experience the reduced costs associated with these tax credits. Chris Harto, senior policy analyst for Consumer Reports, referred to the system as having created “all kinds of chaos for consumers.”
“The current federal electric vehicle tax scheme is a pain,” said John Helveston, an assistant professor of engineering management and systems engineering at George Washington University. “First of all, you have to have money. You have to be wealthy enough to buy the whole car and then wait for your tax-break kickback in April. But if you’re not in that class of buyers, you often need the money when you buy the car, or you’re not going to buy it.”
Consequently, the federal government is announcing changes to this process, allowing EV buyers to immediately benefit from savings rather than waiting for their tax returns. Starting in 2024, consumers will have the opportunity to reduce the upfront cost of a new eligible EV by up to $7,500 and a qualifying used EV by up to $4,000 while still at the dealership.
“[This change] will make a tremendous difference,” said Elizabeth Krear, the vice president of the electric vehicle practice at JD Power. “That’s $7,500 right there at the time of the transaction — versus having to finance at a higher price, which increases the monthly payments, and then waiting for that tax rebate down the line sometime in April.”
Officials within the U.S. Treasury Department have emphasized that this shift to immediate savings will benefit both consumers and car dealerships. The Biden administration has already initiated outreach efforts to car dealers, providing them with details on how to register with a new federal government website that enables them to be reimbursed for these tax credits within 72 hours of selling the vehicle.
“For the first time, the Inflation Reduction Act allows consumers to reduce the up-front cost of a clean vehicle, expanding consumer choices and helping car dealers expand their businesses,” said Laurel Blatchford, the Treasury Department’s chief implementation officer for the Inflation Reduction Act. “The IRS has focused on streamlining this process for car dealers as part of its commitment to improving service and helping taxpayers claim the credits they are eligible for.”
Research conducted by George Washington University revealed that most of U.S. car buyers surveyed prefer receiving money back upfront rather than waiting until they file their taxes. By offering immediate savings, the federal government aims to accelerate the adoption of electric vehicles across the nation.
