Are Electric Cars Still Subsidized by the Government?

Electric cars are only partly subsidized by the government now. The three main federal tax credits that paid up to $7,500 for a new EV, $4,000 for a used one, and up to $40,000 for commercial vehicles all ended for vehicles acquired after September 30, 2025. A federal credit for home charging equipment is still available through June 30, 2026, and state, local, and utility incentives continue on their own timelines.¹

What Ended on September 30, 2025

The One Big Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025, moved up the expiration date on three federal EV tax credits from December 31, 2032, to September 30, 2025. No credit is allowed for any vehicle acquired after that date.¹

The three credits were:

The New Clean Vehicle Credit under Section 30D, worth up to $7,500 for a qualifying new EV.
The Previously Owned Clean Vehicle Credit under Section 25E, worth 30 percent of the sale price up to $4,000 for a qualifying used EV.²
The Commercial Clean Vehicle Credit under Section 45W, worth up to $7,500 for light-duty and $40,000 for heavy-duty vehicles. Leasing companies had used this credit widely, passing the savings through to consumers as lower monthly lease payments and bypassing the income and price caps that applied to personal purchases. That pathway is also closed.³

If you buy an EV today, none of these apply. If you took delivery on or before September 30, 2025, you can still claim the applicable credit on your 2025 return.

Claiming a Credit on a Vehicle You Bought Before the Deadline

For a new vehicle acquired on or before September 30, 2025, report the credit on Form 8936 with your 2025 federal return. You will need the Vehicle Identification Number and the seller report the dealer submitted through the IRS Energy Credits Online system. If that seller report was not accepted by the IRS, the credit is not valid.⁴

Income and Price Limits That Still Apply

For a new vehicle, the manufacturer’s suggested retail price could not exceed $80,000 for vans, SUVs, and pickup trucks, or $55,000 for sedans and other body types.⁵ Your modified adjusted gross income could not exceed $300,000 for joint filers, $225,000 for heads of household, or $150,000 for other filers. You could use income from either the purchase year or the prior year, whichever was lower.⁶

For a used vehicle, the sale price could not exceed $25,000, the vehicle had to be at least two model years older than the purchase year, and the sale had to be through a licensed dealer. Private-party sales did not qualify. The income caps were tighter: $150,000 joint, $112,500 head of household, $75,000 other. A specific used vehicle could generate the credit only once, and a buyer who had already claimed a used EV credit in the prior three years could not claim another.⁷

If You Transferred the Credit to the Dealer

Many buyers took the credit at the point of sale, transferring it to the dealership so the amount came off the purchase price rather than waiting for a refund. You still have to reconcile that transfer on your 2025 return by attaching Form 8936 and Schedule A (Form 8936). If the reconciliation shows you did not actually qualify — because your income exceeded both years’ thresholds or the vehicle failed an eligibility rule — you owe the full transferred amount back to the IRS through Schedule 2 (Form 1040).⁸

The Home Charging Credit Is Still Active

The one federal EV incentive still open to new activity is Section 30C, the Alternative Fuel Vehicle Refueling Property Credit. It covers 30 percent of the cost of buying and installing a qualified home charger, capped at $1,000 for residential property. The credit applies to the hardware, electrical upgrades, and labor. It is available for property placed in service through June 30, 2026.¹

Not every home qualifies. The charger must be installed in a census tract classified as a low-income community or a non-urban area. For installations after January 1, 2025, eligibility is verified using the 2020 Census Tract Identifier, so it’s worth confirming your address falls in an eligible tract before buying equipment.⁹ Bidirectional charging equipment that lets your car send electricity back to your home or the grid also qualifies. You claim the credit on Form 8911 with your federal return.¹⁰

State, Local, and Utility Incentives

State-level programs run independently of the federal credits and were not affected by the September 2025 termination. What is available depends on where you live, but common categories include:

Cash rebates for new or used EV purchases, often scaled to vehicle type, battery size, and buyer income.
Partial or full sales tax exemptions on EV purchases, which can be worth several thousand dollars depending on the state’s tax rate.
Access to high-occupancy vehicle lanes regardless of the number of passengers, usually through a special decal or plate.
Reduced annual registration fees or exemptions from emissions inspections.
Utility rebates for EV purchases or charger installations, and discounted electricity rates for overnight charging.

These programs change frequently, and funding pools can run dry between refills. Check your state energy office, department of motor vehicles, and local electric utility for what’s currently open before you buy.

Registration Surcharges Cut the Other Way

Most states now charge EV owners an annual registration surcharge to make up for the gasoline tax revenue their vehicles do not generate. These fees generally run from $50 to $260 per year, with about $200 being common. Roughly a dozen states charge no supplemental fee. Some states bill the surcharge every two years, and a few index it for inflation. The surcharge sits on top of standard registration fees.

With the federal purchase credits gone, that surcharge is no longer offset at the federal level. If you’re comparing an EV to a gas vehicle now, the math looks different than it did before October 2025: the sticker price is what you pay, the home charging credit is the only federal help left for new activity, and any additional support has to come from your state, your city, or your utility.

1
Internal Revenue Service. FAQs for Modification of Sections 25C, 25D, 25E, 30C, 30D, 45L, 45W, and 179D Under Public Law 119-21
2
Office of the Law Revision Counsel. 26 USC 25E – Previously-Owned Clean Vehicles
3
Internal Revenue Service. Commercial Clean Vehicle Credit
4
Internal Revenue Service. Topic H – Frequently Asked Questions About Transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit
5
Internal Revenue Service. Credits for New Clean Vehicles Purchased in 2023 or After
6
Internal Revenue Service. Topic B – Frequently Asked Questions About Income and Price Limitations for the New Clean Vehicle Credit
7
Internal Revenue Service. Used Clean Vehicle Credit
8
Internal Revenue Service. Instructions for Form 8936 (2025)
9
Internal Revenue Service. Alternative Fuel Vehicle Refueling Property Credit
10
Office of the Law Revision Counsel. 26 USC 30C – Alternative Fuel Vehicle Refueling Property Credit