Peter Oliveira, Advanced Staff Accountant

July 21, 2025

The tax landscape for electric vehicles (EVs) is undergoing significant changes as the Trump Administration sunsets a variety of green incentives under the One Big Beautiful Bill (OBBB) Act.

This legislation, signed into law on July 4, 2025, ends the new, used, and commercial EV tax credits on September 30, 2025. With less than three months before these credits expire, it is crucial for taxpayers considering an EV purchase to understand these changes and act accordingly.

The used EV credit is 30% of the vehicle's sale price (up to a maximum $4,000 credit). This credit offers substantial savings for taxpayers with an Adjusted Gross Income (AGI) below specific thresholds and, in 2025, applies to vehicles made in 2023 and older (at least 2 years older than current year) and sold for less than $25,000. To qualify, buyers must also meet additional requirements, most notably the vehicle must be purchased from a dealer who is required to file a Time-of-Sale report. A comprehensive list of these requirements is available here.

Additionally, a list of vehicles qualifying for the pre-owned EV credit is available at Fueleconomy.gov.

For new EVs, a combined credit of $7,500 may be available if the “critical mineral components” and the “battery components” requirements are met. The first credit caps out at $3,750 if the "critical mineral components" requirement is met. A separate $3,750 credit can also be earned if the "battery components” requirement is met.

Eligibility for the new vehicle credit also depends on the taxpayer’s AGI and the vehicle’s MSRP. These requirements can be found here. A full list of new vehicles qualifying for the credit is available at fueleconomy.gov.

Both the new and used EV tax credits have several unique features not found in other “traditional” tax credits:

• These credits can be claimed as nonrefundable income tax credits or transferred to the dealer, allowing for an immediate reduction in both the purchase price (and therefore interest) paid on the vehicle.
  • When used as a nonrefundable credit, any unused credit in the year of acquisition is lost and cannot be carried forward.
  • Regardless of how the credit is used, taxpayers must file forms 8936 and 8936 Schedule A with their return to confirm eligibility.
• If the taxpayer is not eligible for all or part of the credit transferred to the dealer, the ineligible portion must be repaid to the IRS as an additional tax on their return.
• Taxpayers may use either their current or prior year AGI and filing status to determine eligibility in the year the vehicle is delivered.

Although the OBBB eliminates these valuable credits before year-end, individual taxpayers purchasing a new vehicle in 2025 through 2028 should be aware that a new above-the-line interest deduction of up to $10,000 will be available for vehicles purchased for personal use. This deduction is subject to phaseouts as the taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds certain thresholds ($100,000 for single filers, $200,000 for married filing joint). Since this deduction is “above the line,” taxpayers can claim it even if they do not itemize deductions. When combined with the new EV credit, this deduction can result in substantial tax savings.

However, the interest deduction is only available under the following conditions:

1. The vehicle must be brand new
2. The vehicle cannot be used exclusively for business or fleet purposes
3. The loan must be a first-lien loan (not leased or second mortgage)
4. The vehicle’s final assembly must take place in the United States
5. The vehicle cannot be purchased for salvage or scrap
6. Eligible vehicle types include cars, SUVs, vans, pickups, and motorcycles
7. The vehicle must have a Gross Vehicle Weight Rating (GVWR) of under 14,000 pounds
8. The vehicle must be manufactured for public road use

For commercial EVs, a maximum credit of $40,000 is available depending on the vehicle’s weight, tax basis, and other factors. Details on eligibility and how the credit is calculated are available here. Taxpayers looking to combine the commercial EV credit with Section 179 expensing to accelerate depreciation should visit over6000pounds.com for a list of qualifying vehicles.

Taxpayers considering installing a permanent charging station in their homes or business properties may also qualify for a credit equal to 30% of the station's price, plus installation costs.

• For personal-use property, the credit is capped at $1,000
• For business-use property, the credit is 6% of the cost (30% if prevailing wage and apprenticeship requirements are met), up to $100,000 per qualified item

Unlike the EV tax credits, this credit remains available as long as the property is placed in service by June 30, 2026 and is located in an eligible census tract. Taxpayers can check eligibility and requirements here.

In addition to EV incentives, the OBBB also addresses solar energy credits. Both the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit allow taxpayers to claim a nonrefundable 30% credit on qualified energy-efficient home improvement property. These systems must be placed in service by December 31, 2025 to qualify.

In conclusion, while the changes to EV incentives will affect many taxpayers, they also offer a short window of opportunity. Taxpayers considering an EV purchase or investing in clean energy should educate themselves on these changes and act accordingly to maximize potential savings. As always, it is advisable to consult with a tax professional or visit the IRS website for further information on these credits and their requirements.