The Inflation Reduction Act, which previously provided tax credits for select new electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell electric vehicles (FCEVs), expired on September 30, 2025. We are maintaining this article for archival and educational purposes.
Although the U.S. federal government no longer provides these tax credits, many states maintain their own incentive programs.
READ MORE: Electric Car Rebates and Incentives: What to Know by State
How the EV Tax Credits Worked
Here’s how the federal EV, PHEV, and FCEV tax credits previously worked:
- Upfront discount: Dealerships offered instant discounts on eligible vehicles, allowing customers to use the credit immediately at the time of purchase. The IRS required buyers to obtain a copy of the IRS confirmation that the dealer successfully submitted a “time-of-sale” report. Read more about IRS Publication 5900.
- Credits of $7,500: A $7,500 tax credit was available for select new electric cars, plug-in hybrids, and hydrogen-powered vehicles that met government qualifications. The list of previously qualifying vehicles can be found here.
- Price Caps: Vehicles were restricted to low-emission trucks, SUVs, and vans with prices up to $80,000. Cars were limited to $55,000.
- Income Caps: Rebates were limited to individuals reporting an adjusted gross income of $150,000 or less, $225,000 for those filing as head of household, and $300,000 for joint filers.
- Used EV Rebate: Used electric cars priced under $25,000 were eligible for a credit of up to 30% of the sale price, capped at $4,000. To qualify, used cars had to be purchased at a dealership and be at least two model years old. Purchasers of used vehicles could only qualify for one credit every three years, and each vehicle could only qualify once in its lifetime.
- Leased Vehicles: The IRS allowed dealers claim credits of up to $7,500 on cars available for lease. Dealers, in turn, could apply that amount to the vehicle’s price before setting lease terms, thereby lowering the cost to shoppers.
State and Local Incentives
Currently, some states and local governments offer incentive programs to help new car buyers afford EVs. These can include tax credits, rebates, reduced vehicle taxes, single-occupant carpool lane access stickers, and exemptions from registration or inspection fees.
Editor’s Note: We have updated this article since its initial publication.
