White House officials are meeting with industry representatives today to explore ways to streamline the processing of tax credits for used electric vehicles (EVs).
The Inflation Reduction Act of 2022 reworked how the federal government provides tax rebates to encourage Americans to buy electric cars.
How Used EV Tax Credits Work
The Inflation Reduction Act created a tax credit of up to $7,500 on the purchase of many new EVs. The credit is limited to certain cars based on rules encouraging automakers to build cars and batteries in North America and use minerals originating in the U.S. or certain trade partners.
Related: How Do Electric Car Tax Credits Work in 2024?
The legislation created a similar credit of up to $4,000 on a used EV. The used EV tax credit is more accessible for Americans in many ways.
Shoppers can use the credits up front as a downpayment rather than claiming them on their next tax return, as long as the selling dealership has filed the appropriate paperwork with the Internal Revenue Service.
The act introduced strict limitations on which new cars qualify for a tax credit, but looser rules apply to used EVs.
Buyers must fall under specified income caps. However, rules requiring cars to be built in North America and contain battery minerals mined in the U.S. or partner countries don’t apply to used EVs.
The looser rules have helped create a steadily growing used EV market. Another contributing factor is that early EVs are now making their way into the stream of vehicles used car dealers buy at auction to fill their sales lots.
Industry Working to Make Credits Easier to Use
Ahead of today’s meeting, industry representatives have agreed to take a few steps to help Americans use the credit easily.
Among the steps:
Used car giant Carvana will integrate the credit into its checkout process, helping buyers use it frictionlessly as a downpayment. Rival CarMax hasn’t gone as far but will let customers search specifically for eligible cars.
Recurrent publishes reports on the health of EV batteries. The company will begin listing whether a used car is eligible for the credit on its battery health reports.
Plug-In America will work with Recurrent to create a public directory of dealers who can accept the credit as a down payment and will help train dealership staff to file the correct paperwork.
The Sierra Club will publish informational materials and host events to help shoppers understand the benefits.
John Podesta, Senior Advisor to the President for International Climate Policy, told Kelley Blue Book, “Thanks to the Inflation Reduction Act’s tax credit of up to $4,000 off qualified used EVs, it’s easier than ever for more Americans to go electric. Because most Americans buy used cars, access to the credit is speeding up overall adoption of electric vehicles.”
