EV Federal Tax Credit 2025: What to Know Before It Expires in September
Are you in the market for a new car and curious about your electric vehicle options? Whether it’s because you want the latest and most innovative technology or you’re looking to minimize your carbon footprint, electric vehicles offer an alternative to fossil fuels and can be extremely strong, reliable, and even visually appealing.
The main downside is their cost. The EV federal tax credit for 2025 can help, but this benefit is ending on September 30, 2025.
Before you decide what type of car is right for you or before you pull the trigger on a major purchase, make sure you know all of the potential savings. The tax credit could save you thousands on a new car that you can reinvest, allowing your money to work harder.
Here’s what you need to know about the tax credit before time runs out!
What is the EV Federal Tax Credit?
Purchasing or leasing a new vehicle is fraught with questions surrounding safety, gas mileage, and the luxury items that make buying a new car more of an experience than a necessity. But many consumers also wonder about the cost. Is it worth the higher price tag?
This is where the EV tax credit comes into play. This nonrefundable tax credit applies to many who purchase electric or plug-in vehicles.
Exceptions exist, though, including limits on how much you can earn in a given year. The vehicle must also uphold stringent IRS standards with price caps and stricter manufacturing guidelines.
If you are up for the task of researching eligible EVs, then you have some options for leveraging a tax credit. First, many dealerships allow you to transfer the credit to them instead of claiming it on your 2025 tax return. This grants you immediate cost savings on the purchase of an electric vehicle.
When used properly, you could get a nice car running on clean energy at substantial savings.
When is the EV Federal Tax Credit Ending?
If you’ve been on the fence about investing in an EV, now might be the time to pull the trigger.
This tax credit lasts only until September 30, 2025. With less than one month before its expiration, don’t procrastinate on researching and shopping around to avoid missing out.
Previously, this September 30th deadline was tied to the delivery date. If shipping delays meant your new EV wouldn’t arrive until after that date, you wouldn’t qualify. However, new guidance from the IRS has revised these rules. As long as you sign a binding contract and make a payment before September 30th, you can qualify for the credit.
How is the EV Tax Credit Calculated?
While most savvy shoppers will want to leverage the full capacity of their tax credit, you may find that it’s a bit tricky. In the best-case scenario, taxpayers who qualify for the full benefit can save up to $7,500 for battery and sourcing requirements.
However, not all vehicles hit both of these criteria. Suppose the car meets the battery standard but not the sourcing requirements. In this instance, you would qualify for half of the tax credit ($3,750). The same is true of the reverse situation, where sourcing meets the guidelines but not the battery.
What are the Requirements to Claim the EV Federal Tax Credit?
Not every electric vehicle is eligible for these special savings and price breaks. You must fall into a fairly narrow category when shopping for your new car.
Here are some of the specific criteria of an eligible new EV:
Minimum of a 7-kilowatt-hour battery with a plug-in electric or fuel cell battery
Must be the first transfer of the vehicle
Priced under $80,000 or less for SUVs, vans, and trucks, or $55,000 or less for cars
Must weigh less than 14,000 pounds
Used EVs may also qualify for a credit, but with different requirements, such as being at least two years old and priced at $25,000 or less. Other than the car, here are some other stipulations that apply to would-be buyers.
First, you can only claim the EV tax credit once every three years. If you have previously tapped out your credit, you may not be able to make it in before the sun sets on this tax credit.
Keep in mind that income restrictions also play a large role. A new vehicle requires you to make $300,000 or less if you file married, filing jointly, or are a surviving spouse. That number shrinks to $225,000 if you file as head of household, and $150,000 for all others. In other words, high-income earners can’t qualify for the EV federal tax credit.
Used cars are different: $150,000 or less for filing jointly with your spouse, $112,500 if you file as head of household, and $75,000 for all others.
Is It a Good Time to Purchase an EV?
Investing in a new vehicle might not be right for everyone, even if there are some substantial savings on the horizon. Before you head to the dealership to pick out an electric vehicle, weigh the advantages and disadvantages of spending on a new car.
The first and most obvious reason to make your move now is to claim that EV credit before it disappears at the end of September. If you were already considering buying a new car and want it to have the least impact on the environment, it may be worth it to move the purchase up by a year or two for the savings.
On the other hand, consider whether you truly need a car. Is this just a passing fancy or an unnecessary purchase you’re only considering for the sake of the tax credit? Don’t let fear of missing out force you into making an impulsive decision you’ll regret in the months and years ahead.
Make Your Next Move with Consilio
From tax credits to tax liabilities, your financial picture can get complicated fast. With home, work, and hobbies all pulling at your attention, it can be challenging to find the time to sit down and work out the best way to secure your financial future. Before you make any major moves that will cost you thousands, check in with your financial advisor to make sure an EV upgrade won’t throw off your plan.
At Consilio Wealth Advisors, we specialize in working with tech employees at companies like Amazon, Microsoft, Google, and Meta. Your financial picture has a lot of layers, and we can help you break down the details and make the most of your hard-earned compensation. Our team offers a fiduciary service as part of a wealth planning program, meaning we always look out for your best interests.
Give us a call today to set an appointment to see if an EV is right for you.
Disclosures
The information provided in this article is for educational and informational purposes only and does not constitute investment advice and should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
Consilio Wealth Advisors, LLC ("CWA") is a registered investment advisor. Advisory services are only offered to clients or prospective clients where CWA and its representatives are properly licensed or exempt from licensure.
