Most people are reluctant to take anything car dealerships say at face value – and that includes information about a new change to the tax code that could offer what’s essentially an immediate discount of up to $7,500 on qualifying electric vehicles. 

Instead, a study published in the journal Energy Policy by two Colorado State University College of Business researchers found that potential buyers would be more interested in taking advantage of this tax break – which went into effect on Jan. 1, 2024 – if the government tells them about it first. 

“If you first hear about this when you’re negotiating for a vehicle, you might think something suspicious is going on,” said James Stekelberg, one of the study’s coauthors and an associate professor of accounting at CSU. “But when you hear this information from the IRS or another government source, it seems much more credible.” 

Stekelberg and his co-author, fellow CSU associate professor of accounting Thomas Vance, hope their findings help guide policy makers during the rollout of this new EV incentive, which allows qualifying customers to receive a $7,500 tax credit on eligible vehicles at the point of sale rather than after they file their income taxes, which is how it was before.  

“The broad message is: If you want this policy to work as much as it possibly can, make sure you’re communicating it as fully as possible to potential consumers,” Vance said. 

The transferable tax credit is meant to further a Biden administration goal to have EVs comprise at least half of all vehicle sales by 2030 – and Stekelberg and Vance said their study indicated the point of sale discount could help motivate new buyers to choose electric rather than gas-powered cars, since an immediate discount is easier to understand than an income tax credit months down the line. 

To gather their data, Vance and Stekelberg conducted an experiment using 227 people on an online research service to determine if they were more or less likely to purchase an electric vehicle based on the tax credit policy and whether they learned about the opportunity from the government, unspecified source or the dealer.

They also determined whether respondents already planned on purchasing an electric vehicle or they were a new buyer. They found that the ability to transfer their tax credit had little impact on those who were already considering EVs, but that it had a stronger effect on those who weren’t already considering this type of car. 

“This is a pretty straightforward change, and making people aware of this possibility is really important,” Stekelberg said. 

Stekelberg isn’t just coming at this as a researcher: He bought an electric vehicle of his own last year, and said he remembered thinking, “Wow, I wish I could get my tax benefit now instead of waiting and filling out a bunch of forms while I’m filing my taxes.” 

And as accountants, both Stekelberg and Vance said there’s no real downside to taking the tax credit at the dealer rather than waiting for tax season – especially since it means the people who sold you the car are taking on the brunt of the work in navigating the requisite IRS forms. 

“I’d say there’s really no benefit in waiting,” Vance said. “We want to encourage people to get this benefit when they can.”