Clean Vehicle Credits (CVC) Available Through Dealerships in 2024

Starting January 1, 2024, consumers will be able to choose to transfer their new clean vehicle credit of up to $7,500 and their previously-owned clean vehicle credit (CVC) of up to $4,000 to a registered car dealer at point of sale.

This provision of the Inflation Reduction Act (IRA) will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year. (Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit.)

The new Energy Credits Online portal will allow registered automobile dealers to submit clean vehicle sales information to the IRS and promptly receive payment for transferred credits. Dealers will also use Energy Credits Online to submit “time of sale” reports, which will confirm vehicles’ eligibility for a credit, whether or not the buyer chooses to transfer the credit to the dealer.

For taxpayers considering this, let’s highlight the good and the bad:

• Partial credits cannot be transferred - only the entire credit can be transferred to the dealer - or none of it

• Taxpayers who purchase the car, but then do not qualify for the credit will have to pay back the entire credit on their tax return. All taxpayers MUST check their eligibility before transferring their credit to the dealer to avoid possible recapture repayment at tax time. Click on the IRS webpage link below to check eligibility requirements for the CVC credit

• CVC’s are not refundable on your tax return. The credits just reduce your federal income tax to $0. Any unused credits do not carry forward to future years. Eligible taxpayers whose federal income tax is lower than the CVC would benefit by taking the credit at the dealership

• Recapture rules apply to both the CVC and the Previously Owned CVC

For comprehensive information on the changes/updates to the Clean Vehicle Tax Credits coming as of January 1st 2024, visit the IRS webpage.

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