A massive tax and spending package championed by President Donald Trump and passed by the Senate on Tuesday would end tax credits for electric vehicles within three months.
The legislation, which Republicans are trying to get to the president’s desk by July 4, would axe tax breaks for consumers who buy or lease EVs after Sept. 30.
Lawmakers would eliminate a $7,500 tax credit for households that buy or lease a new EV, and a $4,000 credit for consumers who purchase a used EV.
“If you’re interested in driving an EV — either new, used or leased — now is the time to act,” said Ingrid Malmgren, senior policy director at Plug In America, a nonprofit advocating for a quicker transition to electric cars.
“This is going to be the summer of the EV, because come the end of September those credits will be gone” if the legislation passes and remains unchanged, Malmgren said.
The bill passed the Senate on the narrowest of margins — 51-50, with a final, tie-breaking vote cast by Vice President JD Vance. It now heads to the House for approval.
The Senate’s timeline to nix the EV tax credits is more stringent than an initial version of the legislation passed in May by House Republicans, who would have ended the tax breaks after Dec. 31. The House's "One Big Beautiful Bill Act" also exempted certain EVs from that deadline.
Tax incentives make EVs more affordable
The Inflation Reduction Act, a landmark climate law signed by then-President Joe Biden, offered the tax breaks for EVs through 2032.
The federal tax incentives aimed to boost uptake of EVs — and reduce the nation’s greenhouse gas emissions — by making them more affordable relative to traditional cars with an internal combustion engine.
The transportation sector accounts for about 28% of all U.S. greenhouse gas emissions, making it the largest contributor of U.S. emissions, according to the Environmental Protection Agency.
Fully electric cars don’t emit planet-warming greenhouse gases from their tailpipes because they don’t burn fossil fuels.
While some emissions may be created when electric cars are built and charged, EVs are “unambiguously better for the climate” than gasoline-powered cars even when factoring in those life-cycle emissions, according to researchers at the Massachusetts Institute of Technology.
The EV premium is shrinking
New EVs have historically come with higher price tags than comparable traditional cars, experts said.
In May, the average new EV had a price tag around $57,700 before subsidies, while gas cars cost around $48,100, according to Kelley Blue Book data. Used EVs had a price point around $36,000, slightly higher than the $34,000 for used internal-combustion-engine cars, it found.
The price gap is shrinking, experts said.
Federal tax incentives like the $7,500 federal tax credit “play a pivotal role in accelerating the break-even point between electric vehicles and gasoline vehicles,” wrote researchers at the University of Michigan in 2024.
Despite a higher price tag, EVs may be a better financial deal for consumers over the long haul because maintenance, repair and fuel costs tend to be lower than those for gas cars, experts said.
Even if the federal tax credit disappears, state and local tax incentives may still be available for EV buyers, experts said.
If Republicans nix the federal tax credit, consumers would need to ensure they have the car in hand by Sept. 30 in order to claim the subsidy, Malmgren said.
She recommends opting for the tax break upfront at the point of sale instead of claiming it next year on one’s annual tax return.
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