As electric cars become more common on American roads, fully electric autos (termed “clean vehicles” by the Internal Revenue Service) are now showing up in the used car markets.
Owners of new electric vehicles are already able to claim the Clean Vehicle Credit for 2023, but starting in 2024, a credit will also be offered to qualified buyers of a used clean vehicle.
To keep up with demand, the IRS is proposing new regulations and is updating the language in its guidance for the Clean Vehicle Credit and how the credit can be transferred from the original buyer of the car to an eligible dealer.
The proposed regulations, new guidance and language will apply to electric cars put in service after Dec. 31 of this year.
Legislation Set Electric Wheels in Motion.
The changes in regulations, guidance and other language was put in place by the Inflation Reduction Act, covering new and used electric vehicles.
The new guidance, set forth in Revenue Procedure 2023-33, aims to clarify how taxpayers can transfer clean vehicle credits to an eligible dealer, enabling that dealer to receive advance payments of the credit for an EV, for example, that was taken as a trade-in.
Among other things, the revenue procedure sets out how a dealer would register with the IRS in order to be eligible to receive transfers of the credit from individual taxpayers. Additional details include how and when dealers have to submit seller reports.
The IRS has also updated its list of frequently-asked-questions (FAQs) for the Clean Vehicle Credit, tweaking the topics of:
- Eligibility Rules for the new Clean Vehicle Credit
- Income and Price Limitations for the New Clean Vehicle Credit
- When the New Requirements Apply
- Eligibility Rules for Previously Owned Clean Vehicles
- Claiming the Previously Owned Clean Vehicles Credit
- Qualified Commercial Clean Vehicles Credit
- Transfer of the Clean Vehicles Credit and Previously Owned Clean Vehicles Credi;
- Registering a Dealer for Reporting and Credit Transfers
- Seller Report Information for Buyers of Tax Credits in 2024
More information on the updated FAQs can be found on Fact Sheet 2023-22.
The IRS website, IRS.gov, has details on the proposed regulations and clean vehicle credits, as well as a handy reference chart on the clean vehicle credits.
Source: IRS issues guidance for the transfer of clean vehicle credits and updates frequently asked questions