Shares of electric vehicle (EV) companies saw a downturn following reports that President-elect Donald Trump’s transition team intends to eliminate the $7,500 consumer tax credit for EV purchases. This tax credit was initially set to expire at the end of 2032; however, a significant tax reform law enacted in July pushed that expiration date up to September 30.
The impending deadline has caused considerable urgency among potential EV buyers. Auto dealers are promoting the tax credit heavily, with catchy slogans encouraging customers to act quickly. To qualify for the tax break, buyers must complete their transactions by the September deadline, although recent guidance from the Internal Revenue Service (IRS) suggests that a purchase can be deemed “acquired” if a binding contract is signed and payment is made by that date—even if delivery occurs later.
Despite this clarification, experts warn that navigating this new rule and the associated deadlines can be complicated. Some dealerships are still trying to decipher how to implement these regulations while ensuring compliance with state title and registration procedures. The focus remains on moving vehicles off lots before the deadline.
Within the current market, reports indicate a surge in EV sales, driven in part by the anticipated tax credit. Monthly sales numbers are showing considerable year-over-year growth, and some dealers are seeing increases of 8% to 10% in sales. EVs are increasingly popular even amongst traditional consumers who initially dismissed electric vehicles.
As buyers rush to take advantage of the tax incentive, they are also grappling with the particulars of the credit system. Those eligible can claim the credit on their 2025 federal income tax returns, or they may choose to transfer it directly to the dealer at the time of sale, which can offer immediate savings but prevents further deductions on future tax returns if the credit is claimed upfront.
The eligibility criteria for the tax credit includes income restrictions, with adjusted gross income limits set at $300,000 for married couples filing jointly, $225,000 for heads of household, and $150,000 for all other filers. Additionally, not every EV qualifies for the full tax credit; the vehicle’s price must adhere to specific caps set by the IRS.
Dealers are employing various strategies to clear their inventories, including promoting attractive lease deals that allow for some buyers to bypass stringent income limits. The leasing loophole, part of earlier reforms, permits broader access to tax benefits, contributing to a notable rise in leasing transactions.
While the impending tax credit expiration has spurred buying activity, consumers are urged to thoroughly investigate and compare offers, aligning their purchases with any potential additional incentives. As the September deadline looms, flexibility and due diligence are crucial for buyers looking to capitalize on the available savings associated with electric vehicles.
