While so much has already been written about new EV credits, we’ve been getting a lot of questions from used car stakeholders. This session exclusively covers the used EV tax credit, and the requirements on both vehicles and their buyers.

It maybe shouldn’t be a surprise that the 700-page Inflation Reduction Act is confusing at times. Some parts lack clarity and others rely on systems that don’t exist yet. But one thing that is clear: car dealerships play a critical role in the process.

October 2023 Update

On October 6, 2023, Treasury released new guidance with some important updates for dealers who plan to use the "on-the-hood" credit available starting in 2024.

Starting in 2024, shoppers may “transfer” their eligible tax credit to a dealership to use as a point-of-sale discount on a qualifying new or used vehicle. However, in order for a dealership to accept and pass through this credit, they must first register with the IRS. We will update this page with the registration information as soon as it becomes available. 

Further important updates include: 

  1. Dealers must register via an online portal at least 15 days prior to submitting a claim for reimbursement.
  2. Repayment will happen within 72 hours (via ACH) of a dealer submitting a qualifying used EV report through the portal. This does not include a 48 hour waiting period during which the dealership can still cancel the sale.
  3. Also of note, if the buyer winds up exceeding the AGI requirements at the end of the fiscal year, they will be liable to repay the tax credit amount - not the dealer!
  4. A buyer who has less than $4000 tax liability at year end will not be held accountable for the difference. So, even a buyer owes nothing at the end of the year, they will not have to repay the tax credit: "The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.")

During the sale, dealers must certify the following in the IRS portal:

  1. The maximum amount of the credit allowable and any other incentive available for the vehicle
  2. The amount provided by the dealer to the taxpayer as part of the credit transfer (30% of the purchase price or up to $4000). This amount must equal the amount of the credit allowable and may be provided in the form of cash or a down payment or partial payment for the purchase of the vehicle 
  3. The modified adjusted gross income (modified AGI) limitations ($75,000 for single filer, $150,000 for joint filers) - note that the dealer is not responsible for verifying the buyer’s income
  4. Certification that, no later than the time of sale of the vehicle, the dealer will make the payment to the taxpayer (whether in cash or in the form of a partial payment 15 or down payment for the purchase of such vehicle)
  5. Certification that the availability or use of such incentive does not limit the ability of a taxpayer to make a transfer election and does not limit the use of the credit
  6. Certification that, in the event a buyer returns a vehicle within 30 days of the time of sale, and the dealer fails to report such return through the IRS Energy Credits Online Portal, the dealer will have an excessive payment of any advance payment amount received for the sale of such vehicle

The shopper must also make attestations via the IRS portal at the time of sale, including:

  1. Date of the sale (and the credit transfer)
  2. Buyer’s TIN
  3. A photocopy of the a valid, government-issued photo identification document
  4. An attestation the taxpayer’s prior or current year modified AGI did not exceed the modified AGI limitations. Or, if not known, to the best of the taxpayer’s knowledge and belief, the taxpayer’s prior or current year modified AGI did not exceed such limitation
  5. An attestation that the taxpayer is a “qualified buyer” 
  6. An attestation that the buyer will file an income tax return for the taxable year in which the vehicle is placed in service on or before the due date of the return
  7. Acknowledgement that the buyer will repay any credit amounts subject to recapture, if applicable

Finally, there will be an automated system that accepts or rejects applications in the IRS portal. The IRS website "strongly encourages" both buyers and dealers "to receive confirmation of a successfully submitted seller report before finalizing a sale and placing a vehicle in service. Dealers must provide confirmation of an accepted IRS Energy Credits Online seller report submission to buyers."

January 2023 Update

Implementation details for the new and used EV tax credits are still being ironed out by the IRS and Treasury Department. However, the used EV tax credit is now live for qualified sales. Here is what we know now:

  1. A the time of a qualifying sale, the dealership should provide the purchaser with a letter with details about the sale, including vehicle, VIN, battery size, and maximum eligible credit (30% of purchase price or $4,000). This letter should include the name and EIN of the dealership, and the name and tax ID of the purchaser.
  2. This document must include the following declaration: “Under penalties of perjury, I declare that I have examined this report submitted to the IRS pursuant to Revenue Procedure 2022-42 by [insert name of Seller], and to the best of my knowledge and belief I certify that this report is true, correct, and complete.”
  3. A similar report will be due to the IRS on January 15, 2024 but the requirements or form have not yet been released.
  4. Details are available in this public document. Section 5.01 details seller reporting.
  5. While this page on the IRS website lists manufacturers and models that are eligible for the credit, manufacturers who have not yet submitted paperwork may still do so and additional models and manufacturers may become eligible.

3-Part Series on EV Tax Credits

We've designed a series, lead by two EV experts, to help car dealerships and everyone in the auto industry prepare for used car tax credits.

  • Liz is a mathematician and atmospheric scientist by training and, at Recurrent, is heading up our regulatory affairs on tax credits.
  • Scott is Recurrent’s co-founder and CEO, and you’ve likely heard from him at some point, whether at a conference, or podcast, or webinar, as he’s become a trusted guide on EV adoption in the US.

Here is a recording of the first briefing. If you would like a copy of the slides, you can download them here.

August 2022

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October 2022

The next tax credit briefing was held on October 13th.

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December 2022

The next tax credit briefing was held on December 16th.  You can sign up here for future briefings.

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