Accelerated phaseout dates for the new and used electric vehicle tax credits have led to a recent spike in sales since the enactment of the One Big Beautiful Bill (OBBBA, P.L. 119-21), but a firm’s dealership industry practice leader expects a “short-term dip” once the credits expire.
EV Credits Almost Gone
The IRC § 25E Previously-owned Clean Vehicles Credit and the IRC § 30D New Clean Vehicle Credit both terminate September 30, 2025, meaning neither credit will be allowed for vehicles acquired after that date.
Originally set to expire after 2032, the OBBBA signed July 4 expedited the sunset of the clean vehicle credits, or the ‘EV’ credits as they are often referred to. Amended by the Inflation Reduction Act in 2022, the credits served to incentivize car buyers to go in an eco-friendlier direction but came with detailed eligibility requirements.
The Section 30D EV credit provides up to $7,500 for the purchase of qualifying new plug-in EVs and fuel cell vehicles. But it is split into two $3,750 components: one for meeting a critical minerals requirement and one for meeting a battery component requirement.
Eligible vehicles must have a battery capacity of at least 7 kWh, be manufactured by a qualified manufacturer, have final assembly in North America, and not exceed certain MSRP thresholds ($80,000 for vans/SUVs/pickups; $55,000 for other vehicles).
The used vehicle credit under Section 25E provides up to $4,000 (or 30% of the sale price, if less) for the purchase of eligible used electric or fuel cell vehicles from a dealer for $25,000 or less.
It is subject to income limits and other eligibility requirements for both the vehicle and the buyer. Both credits are non-refundable and must be claimed on Form 8936, Clean Vehicle Credit.
Economic Impact
According to Baker Tilly Principal Michael Mader, July and August were “very strong EV sales months” because of the OBBBA’s change to the credits’ expiration date. Customers are hurrying to buy eligible vehicles before the end of September, while dealerships are working to move their inventories and keep pace with this temporary spike in demand, Mader told Checkpoint.
With the deadline less than three weeks away, dealerships are using the credits to bring in foot traffic to showrooms, although customers basing their decision to buy around the expected value of a credit will not need convincing.
He noted that the new vehicle credit has a cap of $80,000 while the used vehicle credit maximum is $25,000. “A customer that was going to buy an EV used needs to find one that’s priced at $25,000 and they’re going to pay [$21,000]” if they buy this month.
Afterwards, “they’re going to pay $25,000 for that vehicle, because that credit’s not there.”
This will trigger a “shift in the market,” said Mader. “There’s going to be a drop after September 30, and then it’s going to come back to normalization again.”
Tips for Taxpayers
While buyers may have several questions about the credits, their worth, and how to claim them, Mader said it is ultimately the taxpayer’s responsibility to “educate themselves on the EV that they are considering, and what are their proximities to charging stations.” And, he continued, if there are charging stations, are they compatible? “Because some vehicles take special charging hookups and some don’t.”
Prospective buyers should also factor in how long they plan on owning the vehicle and if the value of the credit is worth it right now. While waiting will cause a taxpayer to miss out on these credits, Mader said the EV technology may improve down the line and become more attractive to that customer later.
But for those who are ready to buy now and have done their homework on eligibility, the advice is: “Don’t hesitate.”
The IRS in recently issued FAQs (FS 2025-05) seemed to indicate that “it’s possible you could take delivery after September 30 to get the credit” so long as the payment was made and the contract was signed beforehand. But Mader suggested that taxpayers not take the risk on possibly losing out on a credit, just in case.
Other advice Mader had for those considering an EV included ensuring the dealer is registered to the IRS portal for submitting documentation. Taxpayers cannot claim the credits if the dealership is not registered.
“You need to have [a Form 8936] and the time of sale report,” he said. “Make sure when you walk out of the dealership, you’ve got your time of sale report.”
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