EV Tax Credit Expires September 30 – New IRS Deadline Rule Explained

$7,500 EV Tax Credit Will Disappear in Weeks, but a New IRS Rule Softens the Cutoff

What is the EV tax credit?

Should I buy an EV now before the credit ends?

If you’re considering buying an electric vehicle and can decide within the next few weeks, it might save you thousands. Under the “Big Beautiful Bill” signed into law on July 4, 2025, the federal EV tax credit that had been slated to expire in 2032 will now terminate on Sept. 30, 2025. The credit offers up to $7,500 for new EV purchases, or up to $4,000 for used electric vehicles. The action by congressional Republicans, approved by President Donald Trump, was intended to help finance the continuation of tax cuts from Trump’s first term, which critics say most benefit the wealthiest taxpayers. Congress also eliminated a range of other clean-energy tax incentives in the bill, effectively undoing much of the Inflation Reduction Act enacted under President Joe Biden.

The credit’s end creates an odd close to 2025 for an auto sector that faces further risks from Trump’s tariff plans. Because parts and materials move through global supply chains, tariffs are likely to raise vehicle costs even if final assembly occurs in the U.S. While buying a car usually shouldn’t be rushed, the financial stakes with this credit make acting swiftly appealing. “My usual advice for everyone, all the time, is don’t rush—take your time and make a careful choice,” Sean Tucker, lead editor at Kelley Blue Book, told me. “This is the one situation where you might want to move fast.”

A recent IRS ruling makes the looming deadline somewhat easier to meet. Rather than needing to take delivery of the electric vehicle by Sept. 30 to claim the EV tax credit, the IRS now says you only have to complete the purchase before the month’s end.

What is the EV tax credit?

Currently, the federal government offers a credit of up to $7,500 for a new electric vehicle, plug-in hybrid, or fuel cell electric vehicle. The credit is divided into two equal portions, $3,750 each, if the vehicle satisfies sourcing requirements for battery component materials and critical materials. Because of those rules, only a limited number of vehicles qualify. You must also meet income thresholds—you cannot have taxable income above $150,000 if filing single, $300,000 if married filing jointly, or $225,000 if filing as head of household.

There’s also a credit for used EVs equal to 30% of the sale price, capped at $4,000. The roster of eligible used vehicles is broader, but the used-EV market remains smaller than the new-EV market. That is shifting—more than 100,000 used EVs sold in the U.S. in the second quarter of the year versus over 300,000 new EVs, per KBB data.

To receive the credit, you can claim it on your tax return the following year or assign the credit to the dealer so they can apply it against your purchase price. The latter option has become more common since it’s simpler and lowers your up-front cost. You can also apply the credit to leased vehicles. Dealerships are well-versed in applying credits to leased EVs, Tucker said.

Should I buy an EV now before the credit ends?

The key part of deciding whether to buy a car is to purchase when you’re prepared. Don’t hastily make a major purchase solely because a tax credit is ending. The reality is EV prices are falling and, when you factor in total cost of ownership, are often comparable to gasoline-powered cars. Also keep in mind not every EV qualifies for this credit—the model you’re targeting might not see any price change tied to the credit’s expiration.

However, the credit’s termination likely means dealers will try to clear out electric inventory by the end of September. If you’re shopping and considering one of the qualifying models, you may want to act before October, Tucker said.

There could be additional strategy involved. Tucker recommended checking dealers with large EV inventories, which may offer deeper price cuts to move cars off lots before prices rise. The optimal time to buy might be mid- to late-September, just before the credit ends, to secure the best bargain. “If I tell you it’s your last chance to save $7,500 on something, that’s a sentence you don’t hear very often,” Tucker said.

Don’t let this opportunity eclipse other solid car-buying guidance. Tucker advises that one of the best ways to get a good deal is to pick a vehicle that suits you most of the time, even if it doesn’t cover every hypothetical scenario. Do you truly need a third row if you’ll only use it when guests visit? Do you need a large pickup if your primary use is commuting?

CNET’s auto specialist, Antuan Goodwin, recommends reassessing your purchase goals to save money. For instance, Goodwin suggests, rather than opting for a top-tier model, consider a mid-level trim with only the features you actually need. You might also look at low-mileage used cars or leasing as alternatives to buying new.

“If going electric would stretch your budget, exploring combustion alternatives like plug-in or traditional hybrids are good compromises,” Goodwin said. “That’s mostly because I don’t want to discourage anyone who’s ‘set on going electric’ from doing so, but for someone on the fence, alternatives exist.”

EVs, PHEVs that qualify for the federal tax credit

For vehicles placed in service on or after Jan. 1, 2025, and before Oct. 1, 2025 Source: U.S. Department of Energy

Jon covers artificial intelligence. He previously led CNET’s home energy and utilities beat, focusing on energy-saving tips, thermostats, and heating and cooling. Jon has more than a decade of reporting and writing experience, including work as a statehouse reporter in Columbus, Ohio, a crime reporter in Birmingham, Alabama, and as a mortgage and housing market editor at Time’s former personal finance outlet, NextAdvisor. When he’s not asking questions, you can usually find him half-asleep with a long history book and several cats around him. You can reach him at [email protected]

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