The federal tax credit for electric vehicles (EVs) is about to come to an end. Thanks to the “Big Beautiful Bill,” Congress has made the decision to permanently eliminate the $7,500 incentive for new EVs and up to $4,000 for used ones after September 30, 2025.
This deadline marks a critical turning point for consumers looking to purchase or lease an electric vehicle, as the clock is ticking on this valuable financial benefit. If you’ve been thinking about switching to an EV, now is the time to act and secure these savings before they disappear.
The Disappearing $7,500 Tax Credit
Once the September 30, 2025, cutoff date passes, the tax credit will be gone—unless Congress makes an unexpected change. This means that those planning to buy new EVs will lose the $7,500 benefit, which is essentially the cost of a nice vacation for many families.
For those considering used EVs, the $4,000 credit has been a helpful boost, but it too will no longer be available. The next few months are critical for anyone hoping to benefit from this financial incentive.
Despite these substantial tax credits, EVs still cost more than their gasoline-powered counterparts. On average, a new EV costs around $9,000 more than a similar gas-powered vehicle. Even in the used market, electric vehicles are typically priced about $2,000 higher than traditional cars.
The tax credits helped to bridge this price gap, making EVs more accessible to consumers. Once the credits are gone, the price difference will be more noticeable, making it harder for some buyers to afford the switch to electric.
The Hidden Long-Term Savings of Owning an EV
While the upfront cost of an EV can be higher, the long-term savings can make the investment worthwhile. According to a 2020 study in the journal Joule, EV owners can save around $7,700 in fuel costs over a 15-year period compared to driving a gasoline-powered car.
In certain states like Washington, the savings can exceed $14,000. Additionally, EVs require less maintenance than traditional cars. Without the need for oil changes, exhaust system repairs, or complex fuel system maintenance, owners can save significantly on routine upkeep.
Even without the federal tax credit, EVs remain a financially sound choice for many consumers. Those with long commutes or access to affordable electricity can particularly benefit from these savings, which help offset the higher purchase price of an electric vehicle.
The break-even point, where the savings on fuel and maintenance equal the initial price difference, is often reached sooner than expected.
How to Claim the EV Tax Credit Before It Ends
If you’re planning to purchase an electric vehicle before the tax credit expires, here’s what you need to know to claim the benefit:
- Eligibility Requirements:
- Your vehicle must be assembled in North America.
- The battery must have a capacity of at least 7 kWh.
- It must meet the sourcing rules for battery materials and critical minerals.
- Credit Amount:
- You can claim $3,750 if your car meets only one of the battery/material requirements.
- You can claim the full $7,500 if your car meets both requirements.
- Income Limits:
- For married couples filing jointly, your household income must be under $300,000.
- For married couples filing jointly, your household income must be under $300,000.
- Ways to Claim:
- Instant Discount at the Dealership: Some dealers will apply the credit directly to your purchase price. They will handle the paperwork with the IRS.
- Claim on Your Taxes: If you don’t get the discount upfront, you can claim the credit when you file your taxes by using IRS Form 8936.
With the end of the federal tax credit looming, many manufacturers and dealers are already offering aggressive discounts, rebates, and promotions to encourage consumers to make their purchases now. Free or discounted home chargers may also be available to sweeten the deal.
Why You Should Act Now
If you’ve been waiting to purchase an electric vehicle, time is running out. The federal tax credits for EVs will soon be a thing of the past, and once they are gone, you’ll miss out on substantial savings.
While the upfront costs of EVs remain higher than those of gasoline cars, the long-term financial benefits—lower fuel and maintenance costs—make them an attractive choice. Act quickly before the opportunity slips away, and be sure to consult with a tax advisor to ensure you meet all the requirements for the credit.
