Trump Might Eliminate the EV Tax Credit. What to Know
Among his many promises, President-elect Donald Trump has vowed to eliminate federal Electric vehicle tax credit.
A $7,500 rebate that would allow more Americans to buy electric vehicles could be axed next year as Trump looks for ways to pay for other initiatives, such as Extension of the Tax Cuts and Jobs Act.
“There was an expectation that this tax credit might disappear,” Insert United Statesis a nonprofit organization that advocates for the adoption of electric vehicles.
There are still many questions about how and when the EV tax credit will change, but experts say there are some precautions you can take now if you’re in the market for an electric vehicle.
What is the electric vehicle tax credit?
The current version of the electric vehicle tax credit was passed during the Biden administration Part of the Inflation Reduction Actand it expands existing credit Originally created in 2008.
New electric cars Qualify for a full credit of $7,500 or a partial credit of $3,750 (depending on some rules we’ll get to in a moment). There is a similar tax credit of up to $4,000 for used electric vehicles.
Unlike the original tax credit, which required you to pay the full price and then claim the discount on your tax return, you can now get the discount at the point of sale, Right at the car dealership.
What types of vehicles are eligible for the Electric Vehicle Tax Credit?
That’s where these rules come in.
To qualify for the full $7,500 tax credit, a new electric vehicle van, sport utility vehicle and pickup truck must cost less than $80,000. All other electric vehicles must cost less than $55,000.
Qualifying electric vehicles must also source at least 40% of their “critical minerals” from the United States or a country with a free trade agreement with the United States. At least 50% of the battery components for electric vehicles must be manufactured or assembled in the United States or a country with which the United States has a free trade agreement. Electric vehicles must also undergo “final assembly” in North America (the United States, Mexico or Canada).
Finally, you must meet income limits to take advantage of this credit. For married couples, the annual limit is $300,000. For heads of household, the limit is $225,000. For all others, the annual income limit is $150,000.
Now, these rules generate List of eligible vehicles These include many different models from nine car brands. list expected to grow Over time, automakers began building domestic supply chains to meet battery and assembly requirements.
Look at this: Experts and AI: Is now the time to buy an electric car?
What did Trump say about electric vehicle tax credits?
Incoming Trump administration transition team plans to eliminate electric vehicle tax credits, According to Reuters. The move is planned as part of a broader effort to eliminate programs that support the development and sales of electric vehicles in the United States. Reuters reports. The Trump campaign did not respond to CNET’s request for comment.
The new government has a pretty extensive list Proposed tax reformincluding extending changes to the Tax Cuts and Jobs Act passed during Trump’s first term.
although Trump’s alliance with Tesla executive Elon Musk, Malmgren said the incoming president has not historically supported electric vehicles.
While nothing is certain, “people are certainly going to be watching closely to see what happens in 2025,” said Marty Gennusa, a CPA at the accounting firm. Wagner, Faber, Fine and Ackermann.
While the EV tax credit may be viewed as a liberal policy that benefits progressive EV drivers, Malmgren said the incentives in the Inflation Cut Act have spurred huge growth. Domestic electric vehicle manufacturing investmentEspecially in red states, that could prompt Trump to maintain the policy.
Regardless, Trump does not have the sole power to end tax credits. The electric vehicle tax credit is part of the Inflation Reduction Act passed by Congress in 2022. Changes require an act of Congress.
“This will be the real test of durability” to see whether Congress reverses the policies, Malmgren said. “Voters don’t like giving something and then having it taken away.”
You probably shouldn’t buy an electric car just because the incoming Trump administration might eliminate tax credits.
Should you buy an electric car before the tax credit goes away?
Don’t let politics make your financial decisions for you, experts say, but if you’ve already decided to buy an electric car and you’re deciding whether to buy sooner or later, buying sooner may give you a better chance of receiving tax credits.
There are two reasons for this, Malmgren said. The first is the risk that the EV tax credit will end in 2025. The second is that the battery requirements for the credit will be tightened next year, which may narrow the list of eligible vehicles.
However, Gennusa expressed doubts about revoking the credit as soon as Trump takes office next year. “The Trump administration has some larger agenda,” he said. “I wouldn’t say it’s absolutely imminent.”
Regardless, Malmgren encourages future EV drivers Start with leasingwhich still allows you to receive a tax credit. It’s also a low-investment way to try out your first electric car.
That being said, don’t run out and panic buy a new car only Because of tax credits. A car is a big purchase and you want to make sure you can afford it. The tax credit is a great discount, but don’t put yourself in a hole just to take advantage of it.
What does the end of the EV tax credit mean for leasing?
If you already have an electric car lease with tax credits, you don’t have to worry. Because you have entered into a contract, it is not affected by future changes in tax laws.
Here’s another reason you might want to lock in a lease before the end of 2024: It will protect you from tax credit changes in future years.
But also be aware of wait times for some electric vehicle models, Gennusa said. Even if you walk into a dealership today, you may have to wait several months to get your car.
