The worst aspect of the old EV tax credit was that it could only be applied to a buyer’s income tax liability (not self-employment tax, state taxes, etc) and, unlike some other tax credits, could not be carried over to a future year. The practical effect of this was that the only people who could take the full credit were high-income taxpayers—the folks who least needed it.
The Inflation Reduction Act eliminated that shortcoming—starting on January 1, auto dealers will be able to offer the subsidy as a cash discount on the purchase of an eligible vehicle.
However, in order to be reimbursed for this “cash on the hood” discount, auto dealers (or manufacturers who sell directly to customers) must register with the IRS. The agency has now launched a web site with all the forms and instructions necessary for dealers to get set up to receive payments.
Licensed dealers can also register to receive advance payments to offset the amount of a tax credit that was applied toward a customer’s purchase price. A licensed dealer will be able to receive advance payments 15 days after registering.
At this writing, only the business can be registered. The IRS will expand the tool to allow time-of-sale reports before the January 1, 2024 reporting requirement date. Once that’s set up, all time-of-sale reports must be submitted through this online tool.