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Electric vehicle (EV) tax credit hits a dead end under Trump’s megabill

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Published on July 07, 2025 | 3 min read

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Electric vehicles parked at a charging station in California, EV tax credits may end
Justin Sullivan/Staff/Getty Images
Electric vehicles parked at a charging station in California, EV tax credits may end
Justin Sullivan/Staff/Getty Images

If you’re considering buying an electric vehicle, now is the time to act. The massive tax bill that President Donald Trump signed into law on July 4 wipes out the popular electric vehicle (EV) tax credit. And the deadline for claiming this tax break is hurtling toward us: Electric vehicles purchased after Sept. 30 will no longer qualify. 

The EV tax credit was originally launched in 2008, but received a major overhaul under former President Joe Biden’s Inflation Reduction Act of 2022. That legislation supercharged incentives, expanding the $7,500 credit for new EVs and rolling out a $4,000 credit for used electric vehicles. 

“The purpose of the tax incentives was simply to spur EV adoption by giving a literal ‘incentive’ for people to buy EVs,” says Dave Thomas, director of content marketing and automotive industry analyst at CDK Global, a technology firm serving car dealerships. 

Analysts say the tax credit has been a driving force behind the EV boom. According to J.D. Power’s E-Vision Intelligence Report, 87 percent of EV shoppers in 2024 took advantage of the tax credit — many citing it as a key reason for their purchase. 

Here’s how the EV tax credit works now

The EV tax credit is in effect for new and used electric cars purchased through the end of September.

The tax credit applies to cars purchased in 2023 or later; taxpayers can claim the electric vehicle tax credit if they meet specific income and purchase requirements. 

Tax credit rules for new EVs

For new electric vehicles, you may qualify for a credit of up to $7,500, as long as the vehicle is primarily used in the United States. To be eligible, your modified adjusted gross income (MAGI) must fall below the following limits: 

  • $300,000 for married couples filing jointly or a surviving spouse
  • $225,000 for head of household filers 
  • $150,000 for all other filers

The IRS allows taxpayers to apply the income limit based on the year they take possession of the vehicle or the prior year — whichever is more favorable. 

Tax credit rules for used EVs

For used electric vehicles purchased in 2023 or later, the credit is worth up to $4,000 or 30 percent of the purchase price, whichever is less. The vehicle’s purchase price must not exceed $25,000, and you must buy the car from a licensed dealer. 

Also, the car must be at least two years old when you purchase it; for example, if you bought the car in 2025, it would have to be a 2023 model or older to qualify for the credit.

Used EVs have lower income limitations than newer EVs as follows: 

  • $150,000 for married couples filing jointly or a surviving spouse
  • $112,500 for head of household filers 
  • $75,000 for all other filers 

Another benefit: You can receive the credit at the time of the purchase instead of waiting until tax time to claim it, by transferring the tax credit to the dealer. If you choose this option at the dealership, you must still meet all the IRS requirements when filing your tax return. 

New EV fee in House bill dropped in final law

While the House-approved version of the bill included a $250 annual fee for electric vehicles, the final version of the law omits any mention of an annual EV charge. The House’s proposed fee for electric vehicle owners was aimed at ensuring all drivers contribute equally to maintaining the nation’s roadways. 

Currently, owners of gas-powered cars help fund highway infrastructure through the 18.4 cents per gallon federal gas tax. But that tax has remained unchanged since 1993, even as the cost of maintaining roadways has skyrocketed. Plus, cars have become more fuel-efficient, and some drivers have switched to electric cars.

But some experts argued that the proposed $250 EV fee was excessive. The proposed fee would have been nearly three times what the average driver pays annually in gas taxes, according to a Consumer Reports study.

“The proposal of an annual fee for EVs makes sense on its face as those owners don’t pay the federal or local gasoline taxes,” Thomas says. “However, most calculations say the average driver pays around $100 in gas taxes a year and this fee is clearly more than that.” 

And EV owners often do pay state and local fees tied to their cars, depending on the tax rules of the state where they live.

Bottom line

With the EV tax credit ending soon, drivers considering an EV purchase may want to act quickly. Waiting could mean missing out on valuable tax incentives that can help lower the cost. 

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