If you’re considering buying an electric vehicle (EV), the clock may be ticking. A sweeping new proposal, dubbed the “One Big Beautiful Bill”, is gaining traction in Congress. Led by Republican lawmakers, this legislation could soon eliminate the federal EV tax credit for most vehicles starting in 2025.
Originally launched in 2008, the EV tax credit underwent a major revamp with President Biden’s Inflation Reduction Act of 2022, which not only extended the $7,500 credit for new EVs but also introduced a $4,000 incentive for used EV buyers.
“These credits were designed to make EVs more affordable and boost adoption rates,” says Dave Thomas, director of content marketing and an auto industry analyst at CDK Global, a tech company supporting auto dealerships.
While Republican leaders, including former President Donald Trump, have criticized the credit and pushed for its removal, industry experts believe it has significantly fueled EV demand.
Recent data supports that idea: J.D. Power’s E-Vision Intelligence Report revealed that 87% of EV buyers in 2024 took advantage of the tax credit—and for many, it was a deciding factor in their purchase.
With the bill moving through Congress, here’s what you need to know about the existing EV tax credit—and how the new legislation could affect it.
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Current EV Tax Credit: How It Works
Right now, individuals who meet specific income and vehicle requirements can qualify for federal tax credits when purchasing an electric vehicle.
For new EVs purchased in 2023 or later, eligible buyers may receive up to $7,500 in tax credits, provided the vehicle is primarily used within the U.S.
Income eligibility is based on your Modified Adjusted Gross Income (MAGI):
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Up to $300,000 for married couples filing jointly or surviving spouses
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Up to $225,000 for head of household
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Up to $150,000 for single filers or all other categories
Buyers can apply the income limit for either the year they take possession of the vehicle or the previous year—whichever is more beneficial.
For used EVs, the credit is up to $4,000 or 30% of the purchase price—whichever is less. The sale price must be below $25,000, and the purchase must be made through a licensed dealership. Additionally, the vehicle must be at least two years old at the time of purchase (e.g., a 2023 model or older if purchased in 2025).
Income caps for used EV tax credits are lower:
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$150,000 for joint filers or surviving spouses
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$112,500 for heads of household
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$75,000 for all other filers
Buyers can also choose to transfer the credit directly to the dealership at the time of sale, rather than waiting for their tax refund. However, IRS eligibility rules must still be met when filing.
What the House and Senate Want to Change
Both the House and Senate proposals seek to repeal the EV tax credit—but they differ in how quickly this change would happen.
| EV Tax Credit Changes: House vs. Senate | House Proposal | Senate Proposal |
|---|---|---|
| Value of Tax Credit | $0 for all EVs | $0 for all EVs |
| Expiration Timeline (New EVs) | End of 2025 | 180 days post-passage |
| Expiration Timeline (Used EVs) | End of 2025 | 90 days post-passage |
| New Federal Annual Fee | $250 for EVs, $100 for hybrids | No fee |
Key Difference: Timing
The Senate bill accelerates the repeal timeline:
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The $7,500 new EV credit would vanish 180 days after the law is signed.
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The $4,000 credit for used EVs would disappear just 90 days after enactment.
In contrast, the House version gives buyers until the end of 2025, with some automakers potentially offering credits through 2026, depending on their sales history.
Manufacturer-Based Phaseout in the House Version
The House plan includes a unique clause: carmakers that have sold fewer than 200,000 EVs may continue providing tax credits until the end of 2026.
“For example, companies like Tesla, which already exceeded that threshold, would no longer offer tax incentives once the bill becomes law,” says Dave Thomas. “Consumers will need to stay alert and informed—either by doing their own research or checking with local dealerships.”
EV Fees: House Wants One, Senate Doesn’t
The House bill also proposes a $250 annual fee for EVs and $100 for hybrids. This is not part of the Senate version.
This new charge is meant to help cover infrastructure costs. Gasoline-powered drivers already contribute via the 18.4 cents per gallon federal gas tax, which funds road repairs. But that rate hasn’t changed since 1993—even as road maintenance costs have soared and EVs have become more common.
Critics, however, say the proposed EV fee is excessive. According to Consumer Reports, the $250 charge is nearly triple what the average gas-powered car owner currently pays in gas taxes per year.
“On paper, it makes sense that EV owners should help pay for road upkeep,” says Thomas. “But when the average driver spends about $100 annually on gas taxes, asking EV drivers to pay more than twice that feels unfair.”
EV owners may already be subject to state and local vehicle fees, depending on where they live.
Final Thoughts: Act Now Before the Credit Disappears
Even though the Senate has opted not to include an annual EV fee, both chambers agree that the federal EV tax credit should be eliminated.
With that reality looming, now may be the best opportunity to lock in tax savings before the law changes. Delaying a purchase could mean losing out on thousands of dollars in incentives.
If you’re planning to buy an EV, it may be wise to act sooner rather than later.
