If you've been eyeing an electric vehicle and counting on that $7,500 federal tax credit to sweeten the deal, you're in for a rude awakening. As of January 1, 2026, the credit is officially a thing of the past—eliminated when the One Big Beautiful Bill Act took effect and accelerated the Inflation Reduction Act's timeline by more than seven years.

What Happened to the EV Tax Credit

The Inflation Reduction Act of 2022 had originally extended EV tax credits through December 2032. But the budget reconciliation bill signed into law on July 4, 2025, moved up the expiration date dramatically. The federal EV tax credit—up to $7,500 for new electric vehicles and $4,000 for used EVs—officially expired on September 30, 2025.

"For consumers who were on the fence about going electric, this changes the calculus significantly," says Jason Jordhamo, marketing director at S&P Global Mobility. "The credit represented a meaningful chunk of the purchase price, especially on more affordable EVs."

The Silver Lining: Falling Prices and Used EVs

There's reason to believe the market will adjust. EV manufacturers have been slashing prices over the past 18 months, and that trend is expected to continue through 2026.

"Prices on hybrids and EVs will likely come down in 2026, offsetting the loss of the tax credit," Jordhamo explains. Competition among automakers, improved battery technology, and economies of scale are all driving costs down.

Perhaps more significantly, a wave of leased EVs is about to flood the used car market. "There's going to be a lot of EVs coming off lease in 2026 and they're going to be coming back into the market as used vehicles," Jordhamo notes. This could create unprecedented opportunities for budget-conscious buyers who are comfortable with a gently used electric vehicle.

The EV Charger Credit: Act Fast

While the vehicle credit is gone, one related incentive remains—for now. The Alternative Fuel Vehicle Refueling Property Tax Credit, which covers home EV charger installations, is still available but expires on June 30, 2026.

For installations completed before that deadline, homeowners can claim 30% of the combined cost of equipment and installation, up to $1,000 per charging unit. The property must be located in an eligible census tract to qualify.

State and Local Incentives Still Available

The federal credit may be gone, but many states continue to offer their own EV incentives:

  • California: Offers rebates up to $7,500 for income-qualified buyers through the Clean Vehicle Rebate Project
  • Colorado: Provides a state tax credit of up to $5,000 for new EVs
  • New Jersey: Offers up to $4,000 in rebates for new EVs
  • Oregon: Provides rebates up to $7,500 for low- and moderate-income residents

Additionally, some utilities offer special rates for EV owners or rebates on home charging equipment.

What This Means for Your 2026 Car Shopping

If you're in the market for an electric vehicle this year, here's the new reality:

Compare total cost of ownership. Without the federal credit, the upfront price difference between EVs and gas-powered vehicles is more pronounced. But EVs still offer lower fuel and maintenance costs over time. Run the numbers for your specific driving habits.

Consider the used EV market. With leases expiring on thousands of vehicles that still have years of battery life remaining, the used EV market in 2026 could offer exceptional value.

Check state and local incentives. Your state's programs may significantly offset the loss of the federal credit, depending on where you live.

Don't rush if you don't need to. Automaker competition is fierce, and prices continue to fall. If you can wait, better deals may emerge as the year progresses.

The Bottom Line

The end of the federal EV tax credit marks a significant shift in the electric vehicle landscape. While it's undeniably a blow for consumers who had been counting on that $7,500 boost, the combination of falling prices, an expanding used market, and ongoing state incentives means affordable electric driving remains within reach for many Americans.

The market is adapting. The question now is whether you're ready to adapt with it.