The federal government has issued more than $1 billion in tax credits as an upfront cash incentive to buyers of electric vehicles, the U.S. Treasury Department and Internal Revenue Service said Wednesday.
The Inflation Reduction Act created a mechanism whereby tax credits for buyers of new and used EVs — worth up to $7,500 and $4,000, respectively — could be delivered by car dealers at the point of sale.
The provision kicked in on Jan. 1.
Previously, consumers had to wait until filing their annual tax return, perhaps months or more than a year after their vehicle purchase, to get the federal credit. Americans can now also get the EV tax credit upfront regardless of their federal tax liability, which wasn’t the case prior to 2024.
“This has never been done before,” Deputy Treasury Secretary Wally Adeyemo said during a press call.
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He called the $1 billion threshold a “major milestone” that was hit faster than expected.
“A lot of people would like to see the savings right now instead of waiting to file their taxes next year,” Adeyemo said.
Trying to help EVs compete on price
The transition to EVs is a big component of the Biden administration’s push to reduce U.S. greenhouse gas emissions and curb global warming.
The federal tax credit aims to make EVs more affordable for many households relative to their gasoline-powered counterparts.
The EV tax credits make the cars “very price competitive and in some cases cheaper than the combustion engine vehicles” available on car lots, Adeyemo said.
The average purchase price for electric cars was $55,242 in April 2024, versus $44,989 for traditional cars, according to Cox Automotive data. However, prices are quickly dropping: Average prices for new EVs declined by 9% in the first quarter of 2024 relative to the same period last year, it said.
