The Internal Revenue Service (IRS) has introduced a new online tool that will allow sellers of electric vehicles (EVs) to register to offer the Clean Vehicle Tax Credit of up to $7,500 as a discount to buyers at the time of purchase. The IRS Energy Credits Online tool (IRS ECO) is designed to make the tax credit more accessible to and convenient for taxpayers.
What is the credit?
The clean vehicle credit provides a tax credit of up to $7,500 for certain new EVs. Half the credit is awarded for meeting critical mineral requirements, the other half for meeting battery component requirements. There is also a credit for used EVs capped at the lower of $4,000 or 30 percent of the selling price. For the taxpayer to claim the credit, their income, measured by modified adjusted gross income, cannot exceed certain thresholds. In addition, the vehicle’s price measured by MSRP must also be under certain thresholds dependent on the type of vehicle. Read more about these limitations on the IRS Websites FAQ here.
How can buyers and dealerships benefit?
Starting in 2024, the IRS ECO tool will allow a buyer who claims the credit to transfer it to the dealership, which can use the credit to reduce the price of the qualifying EV. If the credit is not transferred, it can be claimed by the buyer when they file their federal income tax return, which means they will wait until the following tax season to receive the benefit.
“This special online tool is designed to help dealers and sellers navigate this important new Clean Vehicle Credit and help taxpayers at tax time,” said IRS Commissioner Danny Werfel. “Online tools like this are part of the larger effort taking place at the IRS with Inflation Reduction Act funding to make improvements and better serve both taxpayers and businesses.”
How can dealers register?
An initial registration must be completed by an authorized representative of your dealership who will need to enter:
Once registered, the dealer will be able to designate employees who will be authorized to access the IRS ECO tool. Dealers can start registering their business and find a detailed user guide on the IRS website here.
If you have any questions regarding the Clean Vehicle Credit or transferring the credit using the IRS ECO tool, we’re here to help. Contact HBK Dealership Solutions at (330) 758-8613.
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