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90% of qualifying EV buyers get $7,500 tax credit as upfront payment

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The bulk of Americans buying qualifying new electric vehicles are opting to receive an associated tax credit upfront from the car dealer instead of waiting until tax season, according to new Treasury Department data.  

About 90% of consumers who qualify for a “new clean vehicle” tax credit — worth up to $7,500 — have requested their tax break be issued as an advance payment, according to a Treasury Department official speaking on background.

“It means that it’s popular,” Ingrid Malmgren, policy director at nonprofit EV advocacy group Plug In America, said of the data.

Advance payments are a new, optional financial mechanism created by the Inflation Reduction Act, which President Joe Biden signed in 2022. They allow dealers to give an upfront discount to qualifying buyers, delivered as a partial EV payment, down payment or cash payment to consumers. The IRS then reimburses the dealer.

Not everyone will necessarily qualify for the full $7,500, depending on factors like the type of car that’s purchased.

The advance-payment provision kicked in Jan. 1.

Previously, all EV buyers had to wait until tax season the year after their purchase to claim related tax credits, meaning they may wait several months or longer.

How low can electric vehicle prices go?

Because the clean vehicle credit is nonrefundable, households with low annual tax burdens may not be able to claim the tax break’s full value on their returns. But that’s not the case with advance payments: Eligible buyers get their full value regardless of tax liability.

Advance payments are also available for purchases of used EVs. The previously owned clean vehicle credit is worth up to $4,000.

The advance payments can help with affordability, Malmgren said. For example, the upfront cash means households may not need to source funds from elsewhere to cover a down payment, she said. It can also reduce the cost of monthly car payments and overall interest charges, she added.

Car dealers have filed about 100,000 time-of-sale reports for new and used EVs to the IRS since Jan. 1, which signals that a consumer qualifies for a tax break, according to the Treasury official.

The Treasury has issued more than $580 million in advance payments since Jan. 1, the official said.

“Demand is high four months into implementation of this new provision with American consumers saving more than half a billion dollars,” Haris Talwar, a Treasury spokesperson, said in a written statement.

Caveats to advance payments

Of course, there are some caveats to the advance payments. For one, not all car dealers are participating.

More than 13,000 dealers have so far registered with the IRS Energy Credits Online portal to facilitate these financial transfers to consumers. That number is up from more than 11,000 in early February.

For context, there were 16,839 franchised retail car dealers in the U.S. during the first half of 2023, according to the National Automobile Dealers Association. There are also roughly 60,000 independent car dealers, though they largely sell used cars, according to a 2021 Cox Automotive estimate. Not all these franchises or independent dealers necessarily sell EVs.

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Additionally, not all EVs or consumers will qualify for a tax break.

The Inflation Reduction Act has manufacturing requirements for new EVs — meant to encourage more domestic production — that temporarily limit the models that qualify for a full or partial tax credit.

There are 36 new EV models currently available for a tax break in 2024, according to U.S. Energy Department data as of March 18.

Manufacturers of those models include Acura, Audi, Cadillac, Chevrolet, Chrysler, Ford, Honda, Jeep, Lincoln, Nissan, Rivian, Tesla and Volkswagen. Some models qualify for half the tax credit — $3,750 — instead of the full $7,500.

Cars and buyers must meet other requirements, too, which include income limits for households and thresholds on EV sticker prices.

Buyers need to sign an affidavit at car dealerships affirming their annual income doesn’t exceed certain eligibility thresholds. Making an error would generally require consumers to repay the tax break to the IRS.

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How to pay college tuition bills with your 529 plan

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Here are the options for college savings in a volatile market

Largely due to President Donald Trump‘s changing tariff policies, markets have been on a rollercoaster ride since April. Although the S&P 500 has largely rebounded from last month’s lows, some families who have been diligently saving for future college costs may still see their 529 college savings plan balance hasn’t fully recovered.

For those with tuition bills now coming due, there are a few key considerations before tapping those accounts.

“With a little planning, making withdrawals can be something to celebrate, not just something to fear,” said Smitha Walling, Head of Vanguard’s Education Savings Group.

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Managing 529 allocations in a volatile market

For parents worried about their 529 account’s recent performance, Mary Morris, CEO of Commonwealth Savers, advises starting with a look at the asset allocation. “What you need to think about is assessing your risk appetite,” she said.

Generally, 529 plans offer age-based portfolios, which start off with more equity exposure early on in a child’s life and then become more conservative as college nears. By the time high school graduation is around the corner, families likely have very little invested in stocks and more in investments like bonds and cash. That can help blunt their losses but also mute gains.

Pay attention to your fund’s approach toward shifting from stocks to bonds, Morris said.

“If you are in a total stock portfolio, you may not want that ride,” she said: “You don’t want to get seasick.”

If the market volatility is still too much to bear, consider adjusting your allocation.

“One strategy is to start de-risking a portion of their portfolio and reallocate a portion into cash equivalent, which will provide a protection of principle while also proving a competitive return and peace of mind,” said Richard Polimeni, head of education savings at ‎Merrill Lynch.

Still, financial experts strongly caution against shifting your entire 529 balance to cash. “The worst thing an investor can do in a down market is panic and sell investments prematurely and lock in losses,” Polimeni said.

Often that is the last resort. In the wake of the 2008 financial crisis, only 10% of investors liquidated their entire 529 accounts, and 20% switched to less risky assets, according to an earlier survey by higher education expert Mark Kantrowitz.

How to make a 529 withdrawal plan

Another option is to tap a federal student loan and take a qualified distribution from the 529 plan to pay off the debt down the road. However, if you’re thinking of taking out private student loans or a personal loan that starts incurring significant interest immediately, you may want to spend 529 funds first in that case, and defer that borrowing until later.

Once you have a withdrawal plan, you can — and should — keep contributing to your 529, experts say. Not only can you get a tax deduction or credit for contributions, but earnings will grow on a tax-advantaged basis, whether over 18 years or just a few.

“The major advantage is the tax-deferred growth, so the longer you are invested, the more tax-deferred growth you will have,” Polimeni said.

Benefits of a college savings account

Student loan matching funds

Despite those adjustments, some recent changes have helped make 529 plans even more worthwhile: As of 2024, families can roll over unused 529 funds to the account beneficiary’s Roth individual retirement account, without triggering income taxes or penalties, so long as they meet certain requirements.

Restrictions have also loosened to allow 529 plan funds to be used for continuing education classes, apprenticeship programs and student loan payments. For grandparents, there is also a new “loophole,” which allows them to fund a grandchild’s college without impacting that student’s financial aid eligibility.

529 plan popularity has soared

In part because of the new changes, more parents are utilizing a 529 college savings plan

In 2024, the number of 529 plan accounts increased to 17 million, up more than 3% percent from the year before, according to Investment Company Institute.

Total investments in 529s rose to $525 billion as of December, up 11% from a year earlier, while the average 529 plan account balance hit a record of $30,961, data from the College Savings Plans Network, a network of state-administered college savings programs, also showed.

The industry is coming off its best year ever in terms of new inflows,” said Polimeni.

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How appealing property taxes can benefit new homeowners

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If you just bought a house, it may be a good time to check the accuracy of your property tax assessment, experts say. 

Your property tax assessment is the way officials determine the value of your property for tax purposes. Inaccuracies about your home that factor into that formula could mean that you’re overpaying.

If it’s inaccurate, you likely have most of the essential documents you need to appeal, as part of your recent home purchase, according to Sal Cataldo, a real estate lawyer and partner at O’Doherty & Cataldo in Sayville, New York. 

The title report, for instance, is going to tell you the age of the house, Cataldo said. You might have a home inspection report on hand that details the property’s flaws, as well as an appraisal and your mortgage, which show the value of the house and the comparable value in the neighborhood. 

“You’ve gotten a wealth of information about your house, whether you realize it or not,” Cataldo said. 

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A home sale will typically trigger a property tax reassessment because the property is changing hands, with the new market value applied to the assessment. But the specific rules of when the new value is applied and the frequency of reassessments will depend on your area. 

Here’s why it may be valuable to add reviewing your property tax assessment to your to-do list as a newly minted homeowner:

Property taxes on the rise

In addition to your mortgage payment, home insurance and maintenance costs, property taxes are another factor to consider as you assess your housing expenses.

In recent years, property taxes have climbed because of rising home values and tax rates.

The median property tax bill in the U.S. in 2024 was $3,500, up 2.8% from $3,349 in 2023, according to an April report by Realtor. 

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How much you pay varies widely depending on where you live, and some areas see higher bills and price hikes.

As of 2023, the median property tax for homeowners in New York City was $9,937, LendingTree found in a recent report. The city ranks first among the metropolitan areas with the highest median property taxes. Rounding out the top three are San Jose, California and San Francisco, where homeowners paid a median $9,554 and $8,156, respectively.

Inaccuracies may be costing you

Success in the appeal can lead to savings for several years as the change becomes the basis for the next assessment, said Sepp. While some state or local governments reassess annually, others have less-frequent cycles with gaps of several years. Some have no set schedule at all.

Over 40% of homeowners across the U.S. could potentially save $100 or more per year by protesting their assessment value, with median savings of $539 a year, per Realtor.com estimates.

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Deferred capital gains tax on mutual funds: Lawmakers pitch rule change

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If you own mutual funds, year-end payouts can trigger a surprise tax bill — even when you haven’t sold the underlying investment. But some lawmakers want to change that.

Sen. John Cornyn, R-Texas, this week introduced a bill, known as the Generate Retirement Ownership Through Long-Term Holding, or GROWTH, Act. If enacted, the bill would defer reinvested mutual fund capital gains taxes until investors sell their shares.

Bipartisan House lawmakers introduced a similar bill in March.

Why mutual funds incur capital gains tax

When you own mutual funds in a pre-tax 401(k) or individual retirement account, growth is tax-deferred. But if you hold assets in a brokerage account, capital gains distributions and dividends incur yearly taxes.

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Depending on performance, some mutual funds can spit off substantial gains during the fourth quarter. In 2024, some paid double-digit distributions, Morningstar estimated.

These payouts are subject to long-term capital gains taxes of 0%, 15% or 20%, depending on your taxable income. Some higher earners also pay an extra 3.8% surcharge on investment earnings.

About $7 trillion of long-term mutual fund assets held outside of retirement accounts could be impacted by the legislation, according to the Investment Company Institute, which represents the asset management industry.

Bill would ‘provide parity’ for mutual funds

In a statement Wednesday, Cornyn described the mutual fund proposal as a “no-brainer” that would “help provide parity with other investment options.”

If enacted, the proposal would “incentivize Americans to save and invest for their long-term goals” without the stress of an “unexpected tax bill,” Eric Pan, president and CEO of the Investment Company Institute, said in a statement following the bill’s introduction.

However, it’s unclear whether the bill will advance amid competing priorities. Lawmakers are wrestling over President Donald Trump‘s multi-trillion-dollar tax and spending package, which passed in the House on Thursday, and could face hurdles in the Senate.

The U.S. Department of the Treasury has also asked Congress to raise the debt ceiling before August to avert a government shutdown.

Switch to exchange-traded funds

While deferring yearly taxes could benefit some investors, you could also make portfolio changes, financial experts say.

You can avoid mutual fund payouts by switching to similar exchange-traded funds, or ETFs, which typically disburse less income, Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida, previously told CNBC.

Of course, the trade could also trigger taxes if the mutual fund has embedded gains, which may require some planning, he said.

Alternatively, investors could opt to keep mutual funds in tax-deferred accounts, such as pre-tax 401(k)s or IRAs.

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