Topic H — Frequently asked questions about transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit

Updated FAQs were released to the public in Fact Sheet 2024-14PDF, April 2024.

The Inflation Reduction Act of 2022 (IRA) makes several changes to the tax credit provided in § 30D of the Internal Revenue Code (Code) for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles to the § 30D tax credit. The IRA also added a new credit for previously owned clean vehicles under § 25E of the Code.

These FAQs provide detail on how the IRA revises the credit available under § 30D (New Clean Vehicle Credit) for individuals and businesses, and information on the credit available under § 25E (Previously Owned Clean Vehicle Credit) for individuals, and the new credit for qualified commercial clean vehicles under § 45W of the Code.

Q1. What is the transfer election? (added Oct. 6, 2023)

A1. The transfer election allows a taxpayer purchasing a new clean vehicle or previously owned clean vehicle after Dec. 31, 2023, to transfer the entirety of the allowable credit to an eligible entity (a registered dealer) in exchange for a financial benefit (i.e., reduced final cost) from the eligible entity equal to the amount of the credit, whether in cash or in the form of a partial payment or down payment for the purchase of such vehicle. In short, the tax credit can be applied at the point of sale to reduce the cost of the purchase by the amount of the credit. Eligible taxpayers who purchase an eligible vehicle may choose to claim the tax credit on their return instead of transferring a New or Previously Owned Clean Vehicle Tax Credit.

Q2. Who can receive a transferred New or Previously Owned Clean Vehicle Tax Credit? (added Oct. 6, 2023)

A2. Only an eligible entity can receive a transferred New or Previously Owned Clean Vehicle Tax Credit. An eligible entity is generally a dealer that sells a new clean vehicle or previously owned clean vehicle to a taxpayer and registers with the IRS as required by the October 2023 proposed regulations. For purposes of these FAQs, an eligible entity will be referred to as a "registered dealer." Buyers are advised to receive a copy of the seller report submitted by the dealer to the IRS and confirmation of the successful submission of the report through IRS Energy Credits Online.

Q3. What are the requirements a buyer must meet to be eligible to transfer the New Clean Vehicle Credit or Previously Owned Clean Vehicle Credit to a registered dealer? (added Oct. 6, 2023)

A3. A buyer must meet all eligibility requirements for the New Clean Vehicle Credit or Previously Owned Clean Vehicle Credit, as applicable. See Topic A, Topic B, Topic D, and Topic E.

Q4: What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)

A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.

Q5. What information does a registered dealer need to provide a buyer and when? (updated April 16, 2024)

A5. Not later than the time of sale, the registered dealer must provide the buyer with a written disclosure containing the following information under penalty of perjury:

• The MSRP of the new clean vehicle or the sale price of the previously owned clean vehicle.
• The maximum amount of the credit allowable and any other incentive available for the purchase of such vehicle.
• The amount provided by the dealer to you as a condition of you making the transfer election. 
• •   The modified AGI limitations provided in section 30D(f)(10) (in the case of a new clean vehicle) or section 25E(b)(2) (in the case of a previously owned clean vehicle), as applicable. See Topic B, FAQ 1 and Topic E, FAQ 1.
• For previously owned clean vehicles, certification that:
  • The model year of the vehicle is at least two years prior to the calendar year of sale; and
  • That the transfer is the first transfer of the vehicle since Aug. 16, 2022, to a person other than the person with whom the original use of such vehicle commenced.

Not later than the time of sale, the registered dealer must also provide you a copy of the seller report submitted for the vehicle (See Topic B FAQ 9 and Topic D FAQ 2) and confirmation of the successful submission of the report through IRS Energy Credits Online.

Q6. What information do I need to provide to the registered dealer and when? (added Oct. 6, 2023)

A6. Not later than the time of sale, you must provide the registered dealer with the following:

• Date of the transfer election.
• Your taxpayer identification number.
• A photocopy of your valid, government-issued photo identification document.
• An attestation, that either:
  • Your prior year modified AGI did not exceed the modified AGI limitation, or, if not known, to the best of your knowledge and belief, your prior year modified AGI did not exceed such limitation, or
  • To the best of your knowledge and belief, your current year modified AGI will not exceed the modified AGI limitation. See Topic B, FAQ 1 and Topic E, FAQ 1.
• For new clean vehicles, an attestation that the vehicle will be used predominantly for personal use.
• For previously owned clean vehicles, an attestation (or declaration) that you are a qualified buyer. See Topic D FAQ 4.
• An attestation that you will file an income tax return for the taxable year in which the vehicle is placed in service on or before the due date of the return (including extensions), reporting your eligibility for the New Clean Vehicle Credit or Previously Owned Clean Vehicle Credit, as applicable, including the vehicle's VIN, and your election to transfer the credit to the dealer and repaying any credit amounts subject to recapture (if applicable).
• An attestation that you are making this election prior to placing the vehicle in service and this is the first or second transfer election you have made during the taxable year.
• An attestation that in the event you exceed the applicable modified AGI limitations, you will repay the amount received as an addition to tax for the tax year the vehicle was placed in service. 
• An attestation that you have voluntarily elected to transfer the credit.

Q7. How many transfer elections can I make in a year? (added Oct. 6, 2023)

A7. You can make no more than two elections to transfer a clean vehicle credit each tax year. Such elections could be for two Clean Vehicle Credits or one Clean Vehicle Credit and one Previously Owned Clean Vehicle Credit, but cannot be for two Previously Owned Clean Vehicle Credits. Accordingly, spouses may each transfer no more than two Clean Vehicle Credits each tax year.

Q8. Can I transfer part of the credit? (added Oct. 6, 2023)

A8. No. As a buyer, you must transfer the entire amount of the credit allowable to you to the registered dealer.

Q9. When will the transfer election program be in effect? (added Oct. 6, 2023)

A9. The transfer election program applies to vehicles placed in service after Dec. 31, 2023, and before Dec. 31, 2032.

Q10. What if I end up exceeding the modified AGI limitations for the year? (added Oct. 6, 2023)

A10. If your modified AGI exceeds the limitations for the taxable year, you will be required to repay the amount received for transferring the tax credit as an addition to tax for the tax year the vehicle was placed in service.

Q11. If the IRS rejects the seller report submitted by the registered dealer, can I still claim the credit? (added Oct. 6, 2023)

A11. No. If the seller report is rejected, you may not claim the New Clean Vehicle Credit or Previously Owned Clean Vehicle Credit. Starting for vehicles placed in service January 1, 2024, or after, the IRS will reject the seller report and notify the dealer. The IRS will accept or reject submissions in real-time. 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. Dealers must provide confirmation of an accepted IRS Energy Credits Online seller report submission to buyers.

Q12. What benefits may a purchaser get in exchange for transferring a Clean Vehicle Tax Credit to a registered dealer? (added Oct. 6, 2023) 

A12. A dealer can provide a purchasing taxpayer with a financial benefit in cash or in the form of a partial payment or down payment for the purchase of the vehicle. The taxpayer benefits by receiving an immediate financial benefit at the time of sale, rather than having to wait to file a tax return and claim the credit.

Q13. Can I change my mind about whether to transfer a tax credit after a sale has been finalized? (added Oct. 6, 2023) 

A13. No. The transfer election is final.

Q14. How does a dealer know the IRS will issue an advance payment to the dealer? How quickly will the IRS issue advance payments? (added Oct. 6, 2023)

A14.The IRS will promptly issue advance payments via direct deposit (ACH). The IRS anticipates deposits will typically occur within 48-72 hours of a successfully submitted time of sale report and advance payment request. Dealers will receive real-time online confirmation as to whether an advance request was accepted or rejected.

Q15. Are dealers liable to repay the advance payment if the purchaser exceeds the applicable income limits? Are dealers required to verify a purchaser's income in order to receive an advance payment? (updated April 16, 2024) 

A15. Dealers are not required to verify a purchaser's income for a credit transfer or advance payment and are not required to repay the advance payment if the purchaser exceeds the income limits. Dealers are required to disclose information about the applicable income limits to the purchaser, who must attest that he or she expects to qualify for the credit.

Q16. Do I have to transfer a tax credit when I am eligible and a dealer asks? (added Oct. 6, 2023) 

A16. No. Registered dealers cannot require that a buyer transfer a tax credit in order to purchase a new or previously owned clean vehicle.

Q17. Can I transfer a credit if I will use the vehicle for both personal and business use? (added Oct. 6, 2023)

A17. You can transfer the New Clean Vehicle Credit only if you intend to use the vehicle predominantly for personal use.

Q18. What happens if a vehicle is returned or a sale is canceled after a credit is transferred? (added Oct. 6, 2023)

A18. If a sale is canceled before the taxpayer places the vehicle in service (that is, before the taxpayer takes possession of the vehicle), the vehicle will still be eligible for a Clean Vehicle Credit upon a subsequent qualifying sale to another taxpayer. In that case, the credit would not yet have been transferred.

In the case of return made within 30 days of placing the vehicle in service, the purchaser cannot claim a Clean Vehicle Credit with respect to the vehicle. Such vehicle, once returned, was already placed in service by a taxpayer and a new Clean Vehicle Tax Credit is not available to a subsequent buyer.

In the case of a return of a previously owned clean vehicle, the vehicle, once returned, is not eligible for a credit upon a subsequent sale if the vehicle history reflects that such subsequent sale is not a qualified sale. However, if the vehicle history does not reflect the prior sale and return, the vehicle remains eligible.

If the taxpayer made an election to transfer the Clean Vehicle Credit, that vehicle transfer election is nullified, and any advance payment made pursuant to the clean vehicle transfer rules will be recaptured from the eligible entity as an excessive payment.

Q19. How are transferred tax credits treated for tax purposes? (added Oct. 6, 2023)  

A19.

For dealers: Advance payments received by the registered dealer are not treated as a tax credit to the dealer and may exceed the dealer’s regular tax liability. Advance payments received by the registered dealer are not included in the gross income of the dealer. The payment made by the registered dealer to the buyer in exchange for the transferred credit is not deductible by the dealer. Such payment is treated as repaid by the buyer to the registered dealer as part of the purchase price of the vehicle and therefore is treated as included in the total amount received from the sale transaction.

For buyers: The payment made by the registered dealer to the buyer in the form of a cash payment, down payment or partial down payment is not includible in the gross income of the buyer. Such payment made by the registered dealer is treated as an advance payment of the credit to the buyer on behalf of the Secretary of the Treasury and the basis of such vehicle is reduced by the amount of such credit.

Q20. Do dealers and buyers need to claim transferred tax credits when filing their tax return? (added Oct. 6, 2023)  

A20.

For dealers: No. The exclusive method for dealers to claim transferred tax credits is via the advance payment program through IRS Energy Credits Online.

For buyers: An electing taxpayer must file an income tax return for the taxable year in which the vehicle transfer election is made that notes such election. Specifically, the electing taxpayer must file a Form 1040, U.S. Individual Income Tax Return, and attach a completed Form 8936, Clean Vehicle Credits, or successor form, and any other additional forms, schedules or statements prescribed by the Commissioner of the IRS for purposes of making a return to report tax under Chapter 1 of the Internal Revenue Code.

Q21. When do buyers need to repay tax credits transferred to the dealer? (added Oct. 6, 2023)  

A21. If you transfer a credit to a registered dealer but exceed the relevant income limitations, you will need to repay the IRS when filing your tax return. Do not repay the dealer for a transferred tax credit if you end up not being eligible for the credit upon filing your tax return.