EV Tax Credits Are Now Dead — 'Big, Beautiful Bill' Phases Them Out

The federal government just killed the EV tax credit — and it happened faster than almost anyone expected.

President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025. It's a sweeping piece of legislation touching taxes, healthcare, social programs, and energy policy. But one piece hits car buyers especially hard: electric vehicle tax credits are phased out by September 2025, and EV charging tax credits phase out by June 2026.

Here's what that means in plain dollars. Those tax credits were worth up to $7,500 and $4,000 for purchases of new and used EVs, respectively. The credits were supposed to last for another seven years, through 2032. Instead, they're gone years early — and there's no gradual wind-down. This repeal applies across the board with no phaseout or grandfathering period.

If you're thinking about buying an EV, timing now matters a lot. The IRS announced that buyers can still qualify for the tax credit if they sign a binding purchase contract and make a payment by Sept. 30 — even if the car isn't delivered by then. But you can't just order it and wait — you have to put money down.

Why does this hurt? The sticker price gap is real. According to the latest data from Kelley Blue Book, the average purchase price of a new EV is roughly $9,000 higher than the average new gas-powered car. Used EVs on average cost $2,000 more than comparable gas cars. Without the credits, Senior Policy Director Ingrid Malmgren of Plug In America said EVs will become unaffordable to many lower- and middle-income Americans.

The bigger picture is even more striking. This isn't just about EV credits. The law phases out most clean-energy tax incentives introduced under the Biden-era Inflation Reduction Act — credits for low-carbon electricity like wind and solar, electric vehicle rebates, home electrification, clean hydrogen, and domestic manufacturing of batteries and solar panels. The bill was described by The New York Times as derailing renewable energy production and research in the United States, and possibly ceding the clean energy race to China.

The economic projections are stark. The repeal of the three EV credits is projected to reduce federal deficits by $190 billion over the 10-year budget window. But that savings comes at a cost: estimates indicate that the OBBBA's repeal of the credits will cause a 25%-30% decline in EV sales.

So what does the bill offer car buyers instead? There's a partial replacement. The bill replaced the EV credit with something different: starting with the 2025 tax year and running through 2028, taxpayers can deduct up to $10,000 per year in interest paid on qualifying auto loans — a shift from rewarding buyers of electric vehicles at purchase to rewarding buyers of American-made vehicles over time. But most analysts say that doesn't fully replace the upfront savings the EV credit provided.

There's also a fairness wrinkle worth knowing about. Research suggests the old EV credit wasn't exactly a program for everyday buyers — taxpayers in the top 5% of the income distribution reaped 50% of all EV tax credit benefits, whereas taxpayers in the bottom 60% of the income distribution received less than 3% of benefits.

Bottom line: if you were eyeing an EV, your window is effectively closed (or closing fast if you're reading this before October 2025). After that, expect the true cost of going electric to feel noticeably higher — at least until the market adjusts or states step in with their own incentives.