How the EV Tax Credit Transfer to a Dealer Works
Understand how to use the EV tax credit as an upfront reduction on a vehicle's price and the tax responsibilities that follow the point-of-sale transfer.
The method for claiming the federal tax credit for a clean vehicle purchase has changed. Previously, buyers had to wait until filing their annual tax return, but a newer option allows for the immediate transfer of the credit to a registered car dealer. This transforms the credit from a delayed tax reduction into an instant discount at the point of sale. The dealer provides this discount to lower the vehicle’s price and is later reimbursed by the IRS, making the financial incentive more tangible for the buyer.
Eligibility for the Tax Credit Transfer
Buyer Eligibility
A buyer’s eligibility to transfer the credit hinges on their modified adjusted gross income (MAGI) for the year of purchase or the preceding year. For a new clean vehicle, the MAGI must not exceed $300,000 for married couples filing jointly, $225,000 for heads of households, or $150,000 for all other filers. The income caps for a used clean vehicle are lower: $150,000 for married couples filing jointly, $112,500 for heads of households, and $75,000 for other filers.
Vehicle Eligibility
For new vehicles, the Manufacturer’s Suggested Retail Price (MSRP) cannot exceed $80,000 for vans, sport utility vehicles, and pickup trucks, or $55,000 for other vehicles. The vehicle must also have a battery capacity of at least 7 kilowatt-hours. Furthermore, the vehicle must adhere to sourcing requirements for its battery components and the critical minerals contained within them.
For used vehicles, the sale price cannot exceed $25,000, and the model year must be at least two years earlier than the calendar year of purchase. These vehicles must be acquired from a dealer.
Dealer Eligibility
The transfer is only permissible if the dealer is registered with the IRS through its Energy Credits Online portal. Buyers should proactively confirm with the dealer that they are registered and capable of processing the point-of-sale credit before finalizing a purchase. Without this registration, the dealer cannot facilitate the immediate credit.
Information Required for the Transfer
To execute the credit transfer at the dealership, the buyer must provide specific personal information, including their full name and Social Security Number or other Taxpayer Identification Number. This data is necessary for the dealer to complete the time-of-sale report that is submitted to the IRS.
Beyond providing personal data, the buyer must make a series of attestations under penalty of perjury. The buyer must attest that they believe they meet the income eligibility limits. For new vehicles, the buyer must also declare they are the original user of the vehicle and will not be claiming the credit for any other vehicle in the same calendar year.
The Point-of-Sale Transfer Process
After the buyer provides the necessary information and signs the required attestations, the dealer enters this information into the IRS Energy Credits Online portal. This submission is designed to happen while the transaction is taking place. The IRS portal provides an immediate response, either accepting or rejecting the time-of-sale report in real time.
This instant verification gives both the dealer and the buyer confirmation that the vehicle is eligible and the transfer can proceed. Upon receiving a successful confirmation, the dealer applies the credit amount directly against the vehicle’s purchase price. This can be structured as a rebate or as a down payment. The dealer must provide the buyer with a copy of the accepted time-of-sale report.
Post-Transfer Tax Filing Responsibilities
After transferring the credit, the buyer must file Form 8936, Clean Vehicle Credits, with their federal income tax return for the year the vehicle was purchased. This form is used to report to the IRS that the buyer purchased a qualifying vehicle and elected to transfer the credit. The time-of-sale report provided by the dealer is needed to complete this form correctly.
Filing Form 8936 involves a final reconciliation of the credit. The buyer must attest on their tax return whether they met the applicable income limits. If a buyer’s MAGI exceeds the threshold for the year of purchase, they are required to repay the full amount of the credit they received at the point of sale as an additional tax liability.
A recent change in rules addresses how the credit aligns with the buyer’s actual tax liability. The amount of the credit transferred to the dealer may exceed the buyer’s regular tax liability for the year. In such cases, the excess amount is not subject to recapture from the buyer. This means if a buyer transfers a $7,500 credit but only has a $6,000 tax liability, they are no longer required to pay back the $1,500 difference.