Why Some Electric Vehicle Buyers Aren’t Getting the Expected Federal Tax Credit

Last year, the U.S. amended its federal EV tax credit system to make it so that drivers could access the tax credit at the point of sale instead of paying full price and waiting months for the tax credit to kick in. However, while this change was praised for making the federal EV incentive much more accessible to buyers, it may have made it difficult for some buyers to have their EV purchase subsidized.

A small number of buyers have been unable to access the tax credit due to missteps on the dealerships’ side even though they did everything as per the Internal Revenue Service’s (IRA) instructions. Physicist Kristina Meier is one of the many American drivers who have seen the $7,500 EV tax credit slip through their fingers despite being eligible and doing everything right.

Meier and other customers are the unintended victims of changes made to America’s EV tax credit policy by the 2022 Inflation Reduction Act (IRA). In addition to extending the credit to used cars, the bill pulled car dealerships into the EV tax credit system by availing the credit to buyers at the point of purchase.

Dealers were required to enroll in a new online portal created for the tax year 2024 to serve customers who wanted to access the credit at the point of sale. Since they had to report vehicle sales on the platform for every buyer who wanted to cash in on the tax credit when they purchased an EV, these dealerships couldn’t use the forms they’d been using before 2024. In Kristina Meier’s case, the Santa Fe, New Mexico dealership that sold her an EV used outdated forms.

The IRS teamed up with the state dealership associations, the National Automobile Dealers Association and the Treasury Department to inform dealerships across the country of the changes and how they would have to adapt. According to a former Treasury staffer who asked to remain anonymous, these outreach efforts were mostly focused on teaching dealers how to offer the federal tax credit at the point of sale.

Even so, the former staffer says the agencies and associations involved in the outreach ‘made it very clear’ that dealerships would have to follow protocols set forth by the IRA if they wanted to take part in the federal subsidy program. However, it seems that some dealerships are having issues adapting to the new system, to the detriment of their customers.

By September 2024, more than 14,000 of the 17,000 franchised dealerships in the United States had registered with the new portal and were using it to report new vehicle sales to the IRA, meaning around 3,000 dealers across the country and the customers they serve are essentially left out of the federal EV tax credit system.

This hiccup is likely to draw the attention of EV makers like Lucid Motors (NASDAQ: LCID) that see the federal tax credit as a way to make their electric vehicles more affordable for American buyers.

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