For more than a decade, federal tax credits served as a powerful incentive for Americans to choose electric vehicles over their gas-powered counterparts. That era ended on September 30, 2025, when the Inflation Reduction Act's clean vehicle tax credits expired under President Trump's "One Big Beautiful Bill Act."

The change represents one of the most significant shifts in the EV market since Tesla launched the Model S. Buyers who waited until 2026 to purchase an electric vehicle will no longer receive the $7,500 credit for new EVs or the $4,000 credit for used electric vehicles. For families considering a $50,000 electric SUV, that's a meaningful difference in the total cost of ownership.

What Expired—And What Didn't

The eliminated incentives include:

  • New EV tax credit: Up to $7,500 for qualifying new electric and fuel cell vehicles
  • Used EV tax credit: Up to $4,000 for qualifying used electric vehicles
  • Commercial EV credit: Incentives for business purchases of electric vehicles

However, there's a crucial exception for early movers. According to IRS guidance, buyers who entered into a binding contract and made any payment—including a trade-in or small down payment—before September 30, 2025, can still claim the credit when they file their 2025 taxes, even if the vehicle wasn't delivered until after the deadline.

The Alternative Fuel Refueling Property tax credit for EV home chargers has also been shortened. Previously extended through 2032, that credit will now end after June 30, 2026.

State and Local Incentives Remain

While federal incentives have ended, many state and local programs continue to encourage EV adoption. California still offers its Clean Vehicle Rebate Project, providing up to $7,500 for qualifying low-to-moderate income buyers. Colorado offers a $5,000 tax credit for new EVs. New Jersey exempts electric vehicles from sales tax entirely.

Buyers should research incentives in their specific state before making a purchase decision. The Database of State Incentives for Renewables and Efficiency (DSIRE) maintains a comprehensive list of available programs.

A New Benefit for Car Buyers

The One Big Beautiful Bill introduced a new provision that may offset some of the lost EV incentive: a car loan interest deduction. This new federal income tax benefit allows individuals to deduct up to $10,000 per year in interest paid on auto loans for vehicles assembled in the United States.

The benefit applies to any qualifying vehicle—not just electric cars—and could provide meaningful tax savings for buyers financing their purchases. For a $50,000 auto loan at 7% interest, that could translate to over $3,000 in first-year interest alone, potentially yielding a tax benefit of $700-$1,000 depending on the buyer's bracket.

The EV Pricing Landscape

The end of federal incentives comes as EV prices have declined substantially from their 2022 peaks. Tesla has cut prices repeatedly across its lineup, with the Model 3 now starting under $43,000 before any state incentives. Chinese automaker BYD has announced plans to bring aggressively priced EVs to the U.S. market, potentially disrupting the competitive landscape.

Market analysts expect automakers to respond to the lost federal incentive with enhanced manufacturer rebates and discounts. The effective price to consumers may not change as dramatically as the tax credit elimination suggests, though the purchasing experience—and the paperwork involved—will be simpler without IRS forms to complete.

The Bottom Line for Buyers

If you're considering an electric vehicle in 2026, here's what to evaluate:

  • Research state incentives: Your state may still offer substantial credits or rebates that partially offset the lost federal benefit
  • Calculate total cost of ownership: EVs typically have lower fuel and maintenance costs over their lifetime; factor these savings into your comparison
  • Consider the new car loan deduction: If financing, the new interest deduction may provide meaningful tax benefits
  • Watch for manufacturer incentives: Automakers may offer rebates to compensate for lost federal credits
  • Time your purchase strategically: EV prices tend to fluctuate; patience may be rewarded with better deals

The end of federal EV tax credits marks a new chapter for electric vehicles in America. While the immediate financial incentive to switch has diminished, falling battery costs, expanding charging infrastructure, and improving vehicle selection mean electric vehicles remain a compelling option for many buyers—just with different math than before.