If you’re thinking about purchasing a new or used electric vehicle (EV), now is the time to act. Major changes are underway for EV tax credits under the One Big Beautiful Bill Act (OBBBA).
What’s Changing? The federal tax credits for new, used, and leased EVs are scheduled to end for vehicles purchased after September 30, 2025.
This includes:
- New EV Credit (IRC §30D)
- Used EV Credit (IRC §25E)
- Commercial and Leased EV Credit (IRC §45W, when passed through)
Additionally, foreign entity of concern (FEOC) restrictions are now fully in effect and disqualify many vehicles even before the 9/30/2025 sunset.
New EV Tax Credit (Up to $7,500) – Available Through 9/30/2025
To qualify, you must:
- You must buy the vehicle new for your own use (not for resale)
- Use it primarily in the U.S.
- Your Modified Adjusted Gross Income (AGI) cannot exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for Single or MFS
If you purchase a new all-electric, plug-in hybrid, or fuel cell vehicle, you may be eligible for a credit of up to $7,500 through September 30, 2025, if all requirements are met.
To qualify, a vehicle must:
- Be made by a qualified manufacturer
- Have a battery capacity of at least 7 kWh
- Weigh under 14,000 pounds
- Undergo final assembly in North America
- Meet critical mineral and battery component sourcing requirements
- Not contain battery components or critical minerals from a Foreign Entity of Concern (FEOC) (e.g., China, Russia, Iran, North Korea)
FEOC rules apply as of:
- January 1, 2024 for battery components
- January 1, 2025 for critical minerals
MSRP Limits:
- $80,000 for SUVs, vans, and pickup trucks
- $55,000 for all other vehicles
This credit ends for any new EV not placed in service by September 30, 2025. There is no transition relief. Used EV Tax Credit (Up to $4,000) also Ends 9/30/2025. If you’re buying a used electric or fuel cell vehicle, you may be eligible for a 30% tax credit up to $4,000, through September 30, 2025. To Qualify:
- You must buy the vehicle from a licensed dealer
- Sale price must be $25,000 or less
- Vehicle must be at least 2 model years old
- You cannot:
- Be the original owner
- Be claimed as someone else’s dependent
- Have claimed the used EV credit in the last 3 years
Income Limits:
- $150,000 (Married Filing Joint or Surviving Spouse)
- $112,500 (Head of Household)
- $75,000 (Single or MFS)
The Vehicle Must:
- Have a battery capacity of at least 7 kWh
- Weigh under 14,000 pounds
- Be used primarily in the U.S.
FEOC Restrictions: OBBBA introduces unclear language about FEOC-linked vehicles being restricted even when sold used. While Treasury guidance is still pending, preparers should assume possible disqualification for used EVs that originally contained FEOC-sourced components. This credit ends after September 30, 2025, with no extension or transition relief.
How to Claim the Credit
You must file Form 8936 with your tax return for the year you took possession of the vehicle. Include the Vehicle Identification Number (VIN). If you applied the credit at the point of sale (available starting in 2024), it must still be reported on your tax return.
Final Reminder for Clients & Preparers
The clock is ticking. With all EV-related tax credits ending after September 30, 2025, this is the last window for clients to take advantage of valuable savings especially for qualifying vehicles still eligible under FEOC rules. Encourage clients to act early, delays in delivery or registration could mean losing the credit entirely.
Ask our expert to help you file form 8936 with your tax return for the year you took possession of the vehicle to claim the used clean vehicle credit. You will need to include the vehicle identification number (VIN) on the form.
