THE END OF THE EV TAX CREDIT: WHAT TO KNOW FOR 2025 TAX RETURN

As of October 13, 2025, the federal electric vehicle (EV) tax credit landscape has undergone a significant shift. The popular incentive, which provided up to $7,500 for new qualifying EVs and up to $4,000 for used ones, officially ended for purchases made after September 30, 2025. If you're one of the many Americans who purchased an EV or plug-in hybrid before that date, you may still be eligible to claim the credit on your 2025 tax return. This blog breaks down what you need to know right now, how the elimination affects you, and practical steps to prepare for the upcoming tax season. Whether you're a first-time EV owner or just wrapping up your purchase paperwork, staying informed can help maximize your potential savings.

Understanding the EV Tax Credit Elimination

The federal clean vehicle tax credit, established under the Inflation Reduction Act and administered by the IRS, was designed to encourage the adoption of eco-friendly vehicles by offsetting part of the purchase cost through a non-refundable tax credit. However, this program has been phased out effective for vehicles acquired after September 30, 2025. For context:

• New EVs: Previously eligible for up to $7,500 if they met criteria like battery size, North American assembly, and critical mineral sourcing.

• Used EVs: Eligible for up to $4,000, with stricter rules like a maximum purchase price of $25,000 and the vehicle being at least two model years old.

The cutoff is tied to the date you "acquired" the vehicle, which generally means the date you took possession or placed it in service. If your purchase was completed before October 1, 2025, you're in the clear to claim the credit—provided the vehicle qualifies. Note that point-of-sale rebates (where dealers applied the credit upfront) are no longer available post-September 30, so all claims must now go through your tax return.

This change stems from recent legislation, often referred to as the "One Big Beautiful Bill," which modified several energy-related tax provisions. While some state-level incentives may still exist (e.g., sales tax rebates in places like Oregon or New Jersey), the federal credit's end marks a major blow to EV affordability.

Who Is Affected and What You Should Know Today

If you bought a qualifying EV before October 1, 2025, the elimination doesn't retroactively strip away your eligibility. Here's a quick rundown:

• Purchase Date Matters: Vehicles must have been acquired on or before September 30, 2025. "Acquired" typically includes signing a binding contract and making a payment, even if delivery occurs later.

• Income Limits Still Apply: For new EVs, your modified adjusted gross income (MAGI) can't exceed $300,000 for joint filers, $225,000 for heads of household, or $150,000 for single filers. For used EVs, the thresholds are half that.

• Vehicle Eligibility: Not all EVs qualify. Check the IRS list for models that meet battery, assembly, and sourcing requirements. Popular ones like certain Tesla, Chevrolet, and Ford models were eligible pre-cutoff.

• No More Dealer Registrations: Sellers could no longer register new vehicles for the credit program after September 30, reinforcing the hard deadline.

Right now, on October 13, 2025, if you recently purchased an EV, double-check your paperwork. If you made a down payment or signed a binding agreement before the deadline, you might still qualify via a loophole—even if the car arrives later. However, you still need to confirm as IRS interpretations can be nuanced.

How to Claim the Credit on Your 2025 Tax Return

For vehicles bought before October 1, 2025, you'll claim the credit when filing your 2025 federal income tax return (due April 15, 2026, or later with an extension). Here's the step-by-step process:

1. Verify Eligibility: Use the IRS's online tool or review Form 8936 instructions to confirm your vehicle qualifies based on its VIN, purchase price, and your income.

2. Gather Documentation: You'll need:

   • The vehicle's VIN.

   • Purchase contract or bill of sale showing the date and price.

   • Proof of placement in service (e.g., registration date).

   • Seller's report if the credit was transferred at point of sale (though this is less common now).

3. File Form 8936: Attach this to your Form 1040. It calculates the credit amount based on your vehicle's specifics. The credit reduces your tax liability dollar-for-dollar but isn't refundable—if it exceeds what you owe, you won't get the difference back.

4. Consider Transfer Option: If you elected to transfer the credit to the dealer for an upfront discount before the cutoff, it should already be reflected in your purchase price. In that case, you don't claim it on your return.

Remember, the 2025 tax return covers your 2025 income and deductions, so this credit applies if the vehicle was placed in service in 2025.

Preparation Tips for the Upcoming Tax Season

Tax season is just a few months away, so start preparing now to avoid last-minute stress:

• Organize Your Records: Scan and store all EV-related documents digitally. If you bought used, ensure the seller provided a report via IRS Energy Credits Online (which closed for new registrations on September 30).

• Check for State Incentives: While federal credits are gone, states like California or Colorado may offer their own rebates or credits—research via your state's revenue department.

• Estimate Your Tax Liability: Use tax software or an online calculator to see how the credit impacts your overall return. If your income is near the limits, gather pay stubs and other income docs early.

• Consult a Professional: EVs involve complex rules (e.g., battery component sourcing). At Summit, we can help navigate Form 8936 and avoid audits.

• Watch for Updates: Though unlikely, any retroactive changes from Congress could affect claims—stay tuned to IRS announcements.

Preparation Step	Why It Matters	Deadline/Tip
Verify Vehicle Elegibility	Ensures you don't miss out on the credit	Use IRS.gov tools immediately
Collect Documents	Required for Form 8936 attachment	Store in a dedicated folder
Review Income Limits	Could disqualify you if exceeded	Calculate MAGI from 2024/2025 returns
File Early	Avoids delays in processing	Aim for February 2026 submission

Income limitation based on modified adjusted gross income (MAGI)

Condition of Vehicle	Married Couples filing jointly or surviving spouses	Heads of household	All other filers
New Electric	$300,000	$225,000	$150,000
Used Electric	$150,000	$112,500	$75,000

Potential Loopholes and Exceptions

One key exception: If you entered a binding contract and made a non-refundable payment before October 1, 2025, you can still claim the credit, even for delayed deliveries. This "loophole" has been highlighted by the IRS and could apply to many buyers in limbo. However, it doesn't extend to vehicles bought outright after the date. For used EVs, similar rules apply as long as the contract was binding.

Final Thoughts

The elimination of the EV tax credit signals a pivot in federal policy, potentially slowing EV adoption amid rising costs. But for those who acted before October 1, 2025, it's not all bad news—you can still reap the benefits on your 2025 tax return. By staying organized and informed, you'll be well-prepared to claim what's yours. If you're unsure about your specific situation, reach out Summit sooner rather than later. Drive green, save smart, and don't hesitate to contact us!