If you’re planning to buy an electric vehicle (EV) in the United States, the time to act is now. A major government benefit – the $7,500 federal EV tax credit – is set to end on September 30, 2025, under a new law passed by Congress known as the “Big Beautiful Bill.”
This federal incentive has made electric cars more affordable for many buyers over the past years. But after September, this financial help will disappear, making EVs more expensive. Whether you’re buying new or used, this article explains everything you need to know about claiming the credit before it’s gone.
What Is the $7,500 Federal EV Tax Credit?
The $7,500 tax credit is part of the U.S. government’s effort to support cleaner transportation. It helps people save money when they buy a new or used electric vehicle. For used EVs, the credit can go up to $4,000.
But after September 30, 2025, this credit will be permanently removed, unless Congress decides to bring it back in the future — which seems unlikely for now.
Why Is This Credit Being Removed?
The removal of the tax credit is part of a larger federal policy change. While no one expected it to last forever, the sudden cutoff has surprised both buyers and car dealers. Industry experts warn that EVs will become harder to afford once this credit is gone.
That’s because even with price drops over the years, electric cars still cost more than petrol/diesel vehicles. On average:
A new EV costs about $9,000 more than a petrol car
A used EV costs around $2,000 more than a used petrol car
The tax credit has been a key factor in helping buyers close this cost gap. Once it’s removed, buyers will have to pay this extra amount on their own.
Long-Term Savings Still Make EVs a Smart Choice
Even if the upfront cost is high, owning an electric car can save you money in the long run. A study published in the journal Joule in 2020 found that EV owners save an average of $7,700 on fuel over 15 years compared to petrol vehicles.
The savings can be even higher if you charge at home during off-peak hours. In some states, like Washington, savings could reach up to $14,000.
Plus, EVs need less maintenance because they have fewer moving parts:
No oil changes
No fuel system repairs
No exhaust system issues
These hidden savings make EVs a smart investment, even without the tax credit.
How to Qualify for the EV Tax Credit Before It Ends
To claim the $7,500 credit, your car must meet all three conditions:
Assembled in North America
Battery capacity of at least 7 kWh
Meets the battery sourcing and critical minerals rules
How Much Credit Will You Get?
$3,750 if your car meets only one of the battery/material requirements
$7,500 full credit if it meets both
Income Limits Also Apply
You won’t qualify if your income is too high. To claim the full credit:
Married filing jointly: income must be under $300,000
Single filers: income must be under $150,000
Two Ways to Get the Credit
1. Instant Discount at the Dealership
The credit is applied instantly when you buy the car. The dealership files the necessary documents with the IRS and gives you proof.
2. Claim It on Your Tax Return
You can also claim it when filing your tax return using IRS Form 8936 for the year you bought the car.
Final Months Bring Extra Deals from Dealers
With the end of the tax credit approaching, car dealers and manufacturers are offering extra deals to attract buyers before the deadline. These include:
Extra discounts or cashbacks
Free or discounted home chargers
Better finance offers
These added benefits can make this the best time to buy an EV if you’ve been thinking about it.
