But, starting in 2024, a new mechanism would essentially turn the tax break into a point-of-sale discount on the price of new and used electric vehicles. Consumers wouldn’t have to wait to file their taxes to reap the financial benefit — the savings would be immediate.
“That’s really valuable, particularly for people who don’t have a lot of money in the bank,” Levin said. “It’s a ton more consumer-friendly.”
Here’s how the mechanism works: The Inflation Reduction Act lets a buyer transfer their tax credit to a car dealer. A dealer — which must register with the U.S. Department of the Treasury — would get an advance payment of the consumer’s tax credit from the federal government.
In theory, the dealer would then provide a dollar-for-dollar break on the car price, Levin said. He expects dealers to use the funds as a buyer’s down payment, which would reduce the upfront cash necessary to buy a car. Some negotiating may be involved on the consumer’s part, he added.
These transfers apply to new and used cars purchased starting Jan. 1, 2024.