As the Trump administration pushes to overhaul federal tax policy, a popular electric vehicle tax credit could soon disappear. The $7,500 federal EV tax credit is on the chopping block as part of a broader tax reform effort. The credit for used EVs, worth $4,000, could also be eliminated. Together, eliminating both credits is estimated to save an estimated $168.5 billion between 2026 and 2035.
President Trump signed legislation called the “Big Beautiful Bill” in late September 2025, which formally ended both the $7,500 new EV tax credit and the $4,000 used EV tax credit effective September 30, 2025. Republicans control Congress, which made that outcome possible.
Before the credit ended in September 2025, approximately 20 electric and hybrid vehicles qualified for the full $7,500 purchase credit. According to Department of Energy data, just six plug-in hybrid models qualified, and they only received a partial $3,750 credit. To qualify, vehicles must be built in North America and meet strict price caps. Most cars can’t cost more than $55,000, while light trucks and SUVs are capped at $80,000.
There’s a lesser-known path that still opens up credit access: leasing. According to tax policy, the U.S. Treasury classifies leased vehicles as commercial, which means leased EVs can qualify for the $7,500 credit regardless of where the car was made or how much it costs. That loophole makes leasing a broader option than buying when it comes to credit eligibility.
The end of federal credits won’t necessarily stop EV sales entirely. Experts say the shift to electric vehicles will slow down, but it won’t stop. The auto industry has already invested billions in EV production, so it’s not turning back. Still, the rollback hurts both car companies and dealers in states across the country. Tesla representatives told a Trump-transition committee they support ending the tax credit, betting that less established EV competitors will feel the impact more than they will. The federal EV tax credits were originally introduced as part of the Inflation Reduction Act, passed under the Biden administration.
Some states are stepping in to fill the gap. California, for example, has proposed its own state rebate to replace the federal credit if it’s eliminated. State-level incentives aren’t affected by federal policy changes, giving some buyers regional alternatives. Analysts warn that removing clean energy incentives more broadly could result in 97,000 net jobs lost and significantly reduced investment in the U.S. energy sector through 2040, according to sustainablepowernews.com.
References
- https://www.youtube.com/watch?v=0eaSr0iqOKc
- https://www.youtube.com/watch?v=Om0KvEEJa94
- https://www.youtube.com/watch?v=doTYcgUEy_o
- https://www.greencarreports.com/news/1145023_nixing-ev-tax-credit-is-a-trump-priority-with-tesla-support
- https://www.caranddriver.com/news/a62910613/trump-end-federal-ev-tax-credits-report/
- https://patch.com/us/across-america/trump-administration-slams-brakes-ev-tax-credits-what-know
