How to handle the clean vehicle tax credit through December 31, 2023

As of January 1, 2023, buyers of an eligible clean vehicle can claim a tax credit up to $7,500 on their income tax return. The credit is limited depending on modified gross income. Specifically, income may not exceed $300,000 for married taxpayers filing jointly, $225,000 for heads of household, or $150,000 for all other filers.

Along with this change, dealerships are required to provide the following information to buyers of eligible clean vehicles:

• Seller/dealer name and taxpayer ID number
• Vehicle identification number (VIN)
• Vehicle year, model, and trim
• Buyer's name and taxpayer ID number
• Battery capacity
• Whether the taxpayer is the original vehicle user
• Date of sale
• Sales price
• Maximum credit allowable under IRC 30D for new vehicles or IRC 25E for previously owned vehicles

This form must be signed by an authorized representative from the dealership.

Dealerships must accumulate the same information as above throughout 2023 and report everything to the IRS by January 15, 2024. Currently, the IRS is working to create a place on its website where this information can be reported.

How to prepare for new requirements effective January 1, 2024

Before December 15, 2023, dealerships and an authorized person should register their business as a clean vehicle dealer. Dealers that have an account with the Internal Revenue Service (IRS) can use that login information, but if a dealer does not have an account, they can create one here. The following information will be required for registration:

• Dealership name and address
• Federal Employer Identification Number (EIN)
• Dealer state license number
• Bank account information for the dealership

Starting for vehicles purchased on January 1, 2024, or later, the IRS will accept or reject submissions in real-time and notify dealers of rejected seller reports. Therefore, clean vehicle tax credits can be initiated at the time of sale of a qualified clean vehicle instead of being claimed on the buyer’s income tax return. Dealers will be responsible for submitting the information to the IRS in order to determine the clean vehicle eligibility and credit amount as well as providing confirmation of an accepted IRS Energy Credits Online seller report submission to buyers.

It is important to note, if the seller report is rejected, the new clean vehicle credit or previously-owned clean vehicle credit cannot be claimed. Purchasers and dealers are strongly encouraged to receive confirmation of a successfully submitted seller report before finalizing a sale and placing a vehicle in service.

During 2024, dealerships selling eligible clean vehicles will still need to provide similar information as above to the buyer at the time of sale and file the annual information regarding the sale of clean vehicles with the IRS by January 15 of the year following the purchases.

For example, if an eligible clean vehicle is purchased in 2024, the available credit can offset the selling price. The dealership is required to submit all the documentation through the IRS portal, and if all requirements are met and documentation is submitted, then the dealership will receive the funds. The buyer’s information, along with the additional information stated above for all the sales of clean vehicles made during 2024, must be reported to the IRS by January 15, 2025.

The IRS can process the clean vehicle tax credits effective January 1, 2024, so leadership of automotive dealerships should work to train their sales teams as well as their accounting personnel regarding these credits as they will be responsible for informing customers about the available incentives and guiding them through the documentation process.

Resources to help automotive dealers

Below are additional resources that automotive dealers can reference when planning to implement the clean vehicle credit:

• Clean Vehicle Credit Seller or Dealer Requirements
• Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in 2023 or After
• IRS updates frequently asked questions related to new, previously-owned and qualified commercial clean vehicle credits

As these changes go into effect, please reach out for assistance in navigating the requirements and documentation process to ensure compliance. Citrin Cooperman’s Automotive Dealerships Industry Practice continuously monitors these developments and examines IRS guidance to provide accurate and timely insight. To learn more about how Citrin Cooperman can help your auto dealership thrive, reach out to Ann Torno at atorno@citrincooperman.com, Michaela Jerkowski at mjerkowski@citrincooperman.com, or your Citrin Cooperman advisor.