Personal Finance
Trump’s ‘big beautiful bill’ ends $7,500 EV tax credit
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President Donald Trump’s signature on his so-called “big beautiful bill” was a death blow for tax credits that lowered the cost of electric vehicles.
Those tax credits — worth up to $7,500 and $4,000 for purchases of new and used EVs, respectively — won’t be available after Sept. 30. Another tax break that’s ending lets dealers pass along savings on EV leases.
The credits were supposed to last for another seven years, through 2032.
Analysts think the abrupt end to these federal subsidies will trigger a rush by consumers to buy or lease an EV in coming months.
“This is going to be the summer of the EV,” Ingrid Malmgren, senior policy director at Plug In America, a nonprofit advocating for a quicker transition to electric cars, previously told CNBC.
Automakers have certainly taken notice.
Tesla, the nation’s largest EV maker, has taken to e-mail blasts and social media to spread the word that the federal tax credits are soon disappearing.
“If there ever was a time to yolo your car purchase, it’s now,” the carmaker wrote Tuesday on X.
“Order Soon to Get Your $7,500,” read a separate Tesla newsletter e-mailed Tuesday.
(Elon Musk, Tesla’s CEO and former head of the so-called Department of Government Efficiency, spoke out against the legislation that axed the tax credits, lambasting the trillions of dollars it adds to the national debt.)
‘Sense of urgency’
This is a theme consumers will likely see through the summer, analysts said.
Automakers and dealers will likely “promote a sense of urgency: ‘Buy now, the EV incentive is going away,'” said Stephanie Valdez Streaty, director of industry insights at Cox Automotive.
Another factor that may speed up purchases: Consumers must have the vehicle in their possession by Sept. 30, Malmgren said in an interview after the bill passed.
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In the eyes of the IRS, it won’t be enough that consumers order one by Sept. 30 and take possession later, Malmgren said. They must be driving it off the lot by that deadline, she said.
“Having this deadline so soon, just in a couple months, definitely lights a fire under people’s butts,” Malmgren said. “I expect that people who are kind of thinking about it or on the fence about it may take action now.”
Consumers will likely see some “really good” financial incentives like discounts or financing deals before Sept. 30, on top of the federal tax credits, Valdez Streaty said.
For example, Ford extended a “complimentary home charger and standard installation offer” in the U.S. until Sept. 30, Stacey Ferreira, the automaker’s director of U.S. sales strategy, wrote on the company’s website Tuesday.
‘The training wheels are being taken off’
Maskot | Maskot | Getty Images
The Inflation Reduction Act, which provided historic investments by the U.S. to fight climate change, created, extended or enhanced tax breaks (including the EV credit) meant to reduce the nation’s planet-warming greenhouse gas emissions.
EVs are “unambiguously better for the climate” than gasoline-powered cars, even when looking across the entire lifecycle of the vehicle, from manufacturing to recycling, according to researchers at the Massachusetts Institute of Technology.
However, they’re generally more expensive — a primary sticking point for would-be buyers, Valdez Streaty said.
The average transaction price for a new EV in June was about $56,000, before any tax credits or incentives, according to Cox Automotive data. By comparison, the average price for all new vehicles was about $49,000, it said.
Financial incentives have helped bring EVs closer to price parity with traditional cars, and indeed, there’s hardly a price premium for some models, analysts said.
The average EV buyer got financial incentives worth over $8,400 in June, in addition to federal tax credits, Valdez Streaty said. Consumers may also be eligible for subsidies offered by their state or electric utility, Malmgren said.
The end of the federal EV tax credits is like “the training wheels are being taken off” of a nascent technology, Valdez Streaty said. “And those training wheels have helped balance and support EV adoption.”
While EVs are generally more expensive upfront, they may save consumers money over the long term, since recurring charges for maintenance and fuel are generally cheaper, experts said.
What to know before getting an EV
Start soon: EV demand may surge if there’s a rush to buy this summer, and prices may rise if supply is constrained, analysts said. It’s in consumers’ best interest to start sooner rather than later, they said. Ensure your dealer has registered with the IRS to provide a federal tax credit before buying, they said.
Stack tax credits: “Do your research to figure out what credits you’re eligible for,” Valdez Streaty said. Consumers may be able to stack subsidies from the federal government, and their state and utility company, analysts said. “Stacking of EV credits” can be a strong value proposition, especially in areas where gasoline prices are high and electricity rates are low, Valdez Streaty said.
Look at used EVs: “There are a ton of great deals on used EVs,” Malmgren said. “If I were shopping for a vehicle right now, that’s what I’d be looking at.” Used EVs are comparable on price to used gasoline-powered cars, have far fewer maintenance issues, and have strong warranties on their batteries and drive train, she said.
Consider a lease: Buying a new EV comes with various eligibility requirements for the driver and car to qualify for a tax credit. Leasing sidesteps many of them — opening up those federal subsidies to a wider audience, Malmgren said. Check the lease agreement before signing to ensure the price reflects the tax credit.
Opt for upfront tax credit: Consumers should opt to get their tax break upfront as a discount instead of later when filing their annual tax return, Malmgren said. “Given all the uncertainty right now with the administration and IRS, I’d advise against doing the tax credit later,” she said. “Plus you compound your value because that’s money you don’t finance.”
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