Several media outlets, including CNBC, Yahoo Finance, and independent media NPR, have reported that the Biden administration plans to expand electric vehicle (EV) incentives in 2024.
Starting January 1, 2024, EV buyers in the U.S. will be eligible for a federal tax credit of up to $7,500 when purchasing from dealerships. Previously, consumers could only benefit from the full credit if they had tax liability, and even then, they had to wait until the annual tax filing period to receive the complete benefit.
With the tax credit being transformed into a refundable credit, buyers can receive the $7,500 credit at the time of purchase, irrespective of their tax liability. Buyers will need to submit an income tax return for the year they transfer the EV tax credit to the dealer. The dealer, in turn, submits the documentation to the IRS, which later reimburses the dealer with the $7,500.
Buyers of used electric and hybrid vehicles will also qualify for a tax credit of up to 30% of the vehicle price, with a maximum of $4,000.
While most dealerships are expected to participate, consumers are advised to check with dealerships before purchasing an electric vehicle.
The $7,500 incentive will gradually decrease based on the number of vehicles sold. In 2023, buyers could receive the full $7,500 credit for the first 200,000 vehicles sold by each automaker. After reaching this threshold, the credit reduces to $3,750 for the subsequent 200,000 vehicles and further decreases for higher volumes.
In line with the government's policy to increase the share of electric vehicles to over 60% of total vehicle sales in the U.S. by 2032, manufacturers have been ramping up electric vehicle production. However, challenges such as charging infrastructure, range anxiety, and maintenance costs continue to hinder consumer adoption.
The tax credit applies to specific electric vehicle models, and due to enhanced regulations in 2024, electric cars manufactured using batteries produced or assembled in China, Iran, North Korea, Russia, and other concerning foreign entities will no longer be eligible for the $7,500 tax credit. As a result, the number of eligible EV models for the tax credit is reduced to 10, excluding Korean car models.