US paid over $1 billion point of sale tax credit for electric vehicles purchases

U.S. Department of the Treasury and IRS announced that electric vehicle (EV) buyers saved more than $1 billion through the point-of-sale tax credit mechanism. IRS said that $1 billion was used to incentivize 150,000 clean energy vehicles since January 1, 2024.

The Inflation Reduction Act enables up to $7,500 tax credit for new and up to $4,000 tax credit for used clean energy vehicles. These credits ease the purchase price but the point of sale makes it even better. Customers can benefit from an upfront discount by making them available at the point of sale rather than waiting to file annual tax returns.

IRS announced this new way to claim tax credit on January 1, 2024. Since then it’s effective for new and used clean energy vehicles. The ability to transfer tax credits to the dealer has become vastly popular.

Based on the data shared by the department, more than 90 percent of new clean vehicle transactions and around 80 percent of used clean vehicle transactions involved a tax credit transfer to the dealer.

It’s estimated this rebate has enabled customers to save up to $1,750 on fuel and maintenance costs annually. It could be taken as a $21,000 of discounted savings over the 15-year lifespan of a vehicle compared to a gasoline counterpart.

The point of sale tax credit for 150,000 clean energy vehicles equates to around $262 million annually in fuel and maintenance costs and up to $3.2 billion in costs over the lifetime. The department says in 2023, the U.S. recorded around 1.5 million passenger battery electric, fuel cell, plug-in hybrids sales. It’s a 50 percent year-over-year (YoY) increase compared to 2022.

Despite the incentives, the current EV trend is facing downwind due to low consumer demand and the lack of affordable options. However, the situation is likely to improve in the near future.

(source)