IRS Proposes Electric Car Tax Credits for Down Payments

Buyers can transfer their clean energy credits if they attest that they believe they’re eligible, based on their income falling below the threshold levels in the prior year or their belief that their income will fall below the threshold in the year of purchase. The credit is unavailable for single taxpayers who earn more than $150,000 per year, joint filers who earn more than $300,000 per year and heads of households who earn $225,000 per year or more.

Dealer-Side Basics

According to a news release related to the proposed regulations, the IRS will issue advance payments to the recipient dealer for the transferred credit within 72 hours of the date of purchase if the dealer submits information about the sale to the IRS.

The advance payment is not included in income, but the dealer also cannot deduct the amount transferred to the buyer. The amounts are treated as though the buyer paid the amounts to the dealer as part of the purchase price of the vehicle, so will be realized by the dealer in the same way as any other method of purchase.

To allow these transfers, dealers will be required to register with the IRS Energy Credits Online Portal, through which they will submit required information to claim the advance credits. Dealers will not be able to claim these credits on their tax returns and must instead use the IRS’ advance payment procedures via the Energy Credits system.

At the time of sale, the dealer must submit a seller report containing the seller’s identifying information, taxpayer identification number and other valid identification information for the dealer. The dealer must also have submitted the vehicle identification number for the qualifying vehicle. These time-of-sale reports will be required regardless of whether the buyer decides to transfer the credit to the car dealer. Dealers must also provide copies of the report to the buyer, along with written confirmation that the vehicle qualifies for the credit.

To participate in the advance payment program, the dealer must also be in compliance with all federal tax laws and must have filed all required returns and paid all federal taxes, interest and penalties due at the time of sale.

Conclusion

The newly proposed credit transfer system may make access to clean vehicles much more attainable to taxpayers who might otherwise be unable to afford the green option. Taxpayers and their financial advisors should pay close attention for finalized regulations on the transfer system for next year.

Learn more with Tax Facts, the go-to resource that answers critical tax questions with the latest tax developments. Online subscribers get access to exclusive e-newsletters.
Discover more resources on finance and taxes on the NU Resource Center.
Follow Tax Facts on LinkedIn and join the conversation on financial planning and targeted tax topics.
Get 10% off any Tax Facts product just for being a ThinkAdvisor reader! Complete the free trial form or call 859-692-2205 to learn more or get started today.