Why Some Electric Vehicle Buyers Didn’t Get Their Tax Credits This Year

When Kristina Meier bought her plug-in electric minivan last September, she thought claiming the $7,500 federal tax credit would be straightforward. 

Despite carefully reading all the IRS documentation and ensuring her dealer reported the sale, her request for the EV tax credit was unexpectedly rejected. It turns out, the issue was with her dealer's compliance, not her own.

The federal tax credit for electric vehicles, designed to encourage more people to buy environmentally friendly cars, changed significantly in 2024. 

Previously, this credit could only be claimed when filing annual taxes, making it less accessible to those with lower incomes who could benefit immediately from a rebate at the point of purchase.

The updated rules, part of the Inflation Reduction Act passed during the Biden administration, now offer a rebate at the time of buying the car. This means buyers can reduce the purchase price right away, rather than waiting until tax filing season. This change aimed to make the credit easier to access and more attractive.

However, this change required dealers to use a new online system to report sales to the Internal Revenue Service (IRS). The system was necessary both for facilitating immediate rebates and for those who still wanted to claim the credit at tax time. Despite outreach from the Treasury Department and repeated instructions, not all dealers paid close attention.

By September last year, although over 14,000 dealers were enrolled in the new system, about 3,000 were not. Kristina Meier bought her vehicle from one of these non-compliant dealers. 

While the dealer eventually acknowledged the mistake and tried to correct it, the sale had been made too long ago to report through the new system, leading to the rejection of her credit.

This issue is affecting a small percentage of electric vehicle buyers. Some dealers had used outdated forms that were not acceptable under the new rules.

The transition to the new system has, for the most part, succeeded, with more than 300,000 transactions processed correctly. However, it’s unclear exactly how many people have encountered problems like Meier's. 

Early in the tax filing season, tax preparation consultants like H&R Block noted a higher than expected number of rejections.

The IRS might need to consider allowing retroactive reports to address these issues, similar to previous accommodations. That said, current challenges in the federal government, including layoffs at the IRS, could complicate such solutions.

For anyone buying an electric vehicle this year, the advice is clear: ensure the dealer is compliant with the new reporting system and opt for the rebate upfront to avoid complications later.

Despite the frustration, Kristina Meier still loves her new car and appreciates its benefits. But her experience serves as a cautionary tale for other prospective electric vehicle buyers.

If you’re struggling to make car loan payments due to the rejected tax credit, consider reading through auto loan relief options. 

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