Claiming a used EV tax credit may be harder than you thought

PHOENIX (AZFamily) — Thomas Burns bought a used Tesla last year, expecting a $4,000 used clean vehicle tax credit. When he tried to submit his tax return, he realized he had a problem.

“My taxes got rejected, saying that the VIN number for my car wasn’t reported sold in 2024,” Burns said.

Burns went to AutoNation, where he purchased the vehicle, and learned the dealership hadn’t submitted a clean vehicle seller report to the IRS. The dealership told the Attorney General’s office in an email they only register vehicles for the tax credit if a customer requests it.

Burns was surprised by the response.

“I knew of the tax credit. They even told me about it. You’ll get a better deal on this because you’ll get that money back when you file your taxes,” Burns said. “But there was no mention of a form. They’re supposed to provide the form, and they’re supposed to submit it to the IRS and provide me of proof that it was submitted. There was no word of that.”

On its website outlining the used clean vehicle tax credit, the IRS says “At the time of sale, a seller must give you information about your vehicle’s qualifications. Sellers must also register online and report the same information to the IRS.” If the dealership doesn’t, the vehicle isn’t eligible.

Without that credit, Burns says he wouldn’t have purchased the vehicle.

“It was the only reason I could afford it,” Burns said. “$4,000 is a big chunk of money.”

To get the tax credit, a buyer has to meet several qualifications, including an income requirement. The vehicle also has a meet a list of qualifications, including a sale price that’s $25,000 or less, a model year at least two years older than the year it’s purchased, and the vehicle cannot have been transferred to another qualified buyer after August 16, 2022.

“Because it’s so complex, the rule basically says it’s on the dealership to claim this tax credit and pass it on to the consumer,” Consumer Reports’ Keith Barry said.

The complexity has caused some confusion, and car shoppers can face conflicting information when trying to claim the used clean vehicle credit.

“We saw dealerships advertising the rebate on cars that didn’t qualify,” Barry said. “We saw dealerships that baked the discount into the price of a used car with the fine print saying you may or may not qualify for this tax credit.”

In fact, when Consumer Reports evaluated used electric vehicles and plug-in hybrid EVs on the market, they found less than 20% actually qualified for the tax credit.

“The biggest reason why cars didn’t qualify was price,” Barry explained. “There are a lot of $100,000, $80,000 EVs that two or three years later are worth $60,000, $40,000, so those are too expensive to qualify for the EV tax credit.”

Burns was confident he qualified for the full $4,000 tax credit because he says the dealership told him he would.

“We’ve thoroughly investigated Mr. Burns' EV Tax Credit inquiry,” a spokesperson for AutoNation told On Your Side in a written statement. “At AutoNation, we understand the importance of receiving tax credit and are committed to delivering the highest level of service to our customers. Although a prior purchase of the vehicle in 2023 makes the vehicle ineligible for the credit, we have contacted Mr. Burns directly to provide him with a resolution.”

Burns confirmed only that “the matter has been resolved on terms satisfactory to all parties.”

If you are claiming a clean vehicle tax credit, you must file Form 8936 with your tax return. The IRS has a guide to help car buyers who did not receive a time-of-sale report.

For car shoppers who plan to claim a used clean vehicle credit in the future, get everything in writing.

“Make sure it’s itemized on the price of the car,” Barry said. “Make sure that you see it in that sales document before you actually take delivery of the car. Buying a car is going to take longer than you want it to. You’re going to want to read the fine print. If something looks too good to be true, go home and sleep on it.”

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