The Clock Ticks on EV Tax Credits as New Legislation Advances
With the Senate’s recent approval of a new tax-and-spending package, electric vehicle (EV) enthusiasts face a shrinking window to benefit from federal tax credits. Championed by President Donald Trump, this legislation, if enacted, will end incentives for EV purchases by the end of September.
The proposed bill, known as the Big Beautiful Bill Act, seeks to eliminate the $7,500 credit for new EVs and the $4,000 credit for used ones. Republicans aim to finalize the legislation by July 4, urging potential EV buyers to act quickly.
Ingrid Malmgren, senior policy director at Plug In America, emphasized the urgency, stating, “If you’re interested in driving an EV — either new, used or leased — now is the time to act.”
The bill narrowly passed in the Senate with a 51-50 vote, Vice President JD Vance breaking the tie. It now moves to the House, where it faces further scrutiny. Notably, the Senate’s deadline for ending the credits is more aggressive than the House version, which had set it for December 31.
EV Tax Incentives and Their Impact
Initially introduced by the Inflation Reduction Act under former President Joe Biden, EV tax credits were designed to last until 2032. These incentives aimed to make electric vehicles more affordable while reducing greenhouse gas emissions, as the transportation sector is the largest contributor in the U.S., according to the Environmental Protection Agency.
Electric vehicles do not emit greenhouse gases during operation, unlike traditional cars. Even when taking into account the entire lifecycle, including production and charging, EVs are “unambiguously better for the climate” than gasoline-powered vehicles, according to MIT researchers.
The Decreasing Price Gap Between EVs and Gas Cars
Historically, new EVs have been priced higher than their gasoline counterparts. In May, the average cost of a new EV was around $57,700, compared to $48,100 for conventional vehicles, based on Kelley Blue Book data. The price difference is narrowing, with used EVs at $36,000 versus $34,000 for used gas cars.
Tax credits have played a crucial role in reducing the cost gap, accelerating the financial break-even point between EVs and gasoline vehicles, as noted by University of Michigan researchers in 2024.
Despite higher initial costs, EVs often prove to be more economical over time due to reduced maintenance, repair, and fuel expenses. Even without federal credits, state and local incentives may still be available for EV buyers.
Consumers aiming to leverage the federal tax credit should ensure possession of the vehicle by September 30. Malmgren advises opting for the tax break at the point of sale rather than on next year’s tax return.
Original Story at www.cnbc.com