Overview of Federal Car Tax Credits Under Recent Legislation

If you are considering purchasing a new electric vehicle (EV), there is a limited window to combine tax credits from legislation enacted during both the Biden and Trump administrations.

Consider the following legislative incentives:

• 2022 Inflation Reduction Act: Provides up to a $7,500 tax credit for new plug-in EVs or fuel-cell electric vehicles. This credit is scheduled to end on September 30, as a result of subsequent legislation.
• Big Beautiful Bill: This law introduces an annual tax credit of up to $10,000 on the interest of loans for new vehicles, provided the vehicles weigh less than 14,000 pounds and are assembled in the United States. The credit applies to purchases made from 2025 through 2028.

Details on the New Law

Duration of Tax Credits

• The Inflation Reduction Act credit is available until September 30.
• The Big Beautiful Bill credit applies to purchases from 2025 through 2028.

Combining Auto Tax Credits

Combining the credits from both laws over the next four years may result in significant savings on an EV purchase.

Considerations for EV Purchases

This approach may not be optimal for all buyers. The average price for a new EV this year is $57,734, according to Kelley Blue Book. After applying the $7,500 tax credit, the price difference between a new EV and a comparable gas-powered vehicle is approximately $1,500. Over five years, estimated fuel costs are $9,490 for gas-powered vehicles and $4,295 for EVs, based on Kelley Blue Book data.

For those open to used vehicles, the average listing price for used EVs is about $20,000 less than for new models. A $4,000 tax credit for used EVs is available under the Inflation Reduction Act, but this does not qualify for the Trump-era tax credit.

Additional Eligibility Details

• Big Beautiful Bill: The tax credit phases out for individuals with incomes between $100,000 and $150,000, and for joint filers between $200,000 and $250,000. The credit is not available for fleet purchases, commercial vehicles, or leases.
• Inflation Reduction Act: To qualify for the EV credit, the vehicle must be assembled in North America and purchased for personal use. Income limits are $150,000 for individuals and $300,000 for joint filers.