Binding Written Contract Transition Rule: Pre-October EVs

If you signed a purchase agreement for an electric vehicle and put money down on or before September 30, 2025, you can still claim the Section 30D clean vehicle credit of up to $7,500, even though the One Big Beautiful Bill Act (P.L. 119-21) terminated the credit for vehicles acquired after that date.¹ The transition rule turns on two dates that don’t have to match: the date you acquired the vehicle (signed a binding written contract and made a payment) and the date you placed it in service (actually took delivery). The acquisition had to happen by September 30, 2025. Delivery can come later, and you claim the credit on the return for the tax year you take possession.²

There is no statutory deadline forcing you to take delivery by a particular date. The termination language targets acquisition, not delivery.¹ A long wait simply pushes the credit into a later tax year.

What Makes Your Contract “Binding” to the IRS

This is where most disputed claims will fail. The IRS applies state contract law and asks whether the deal is truly enforceable: neither side can walk away without real financial consequences. Two things satisfy the test — a significant non-refundable deposit, or a liquidated damages clause that triggers if either party backs out.³

The threshold the IRS uses comes from Tax Reform Act conference report guidance: a liquidated damages provision is acceptable if the damages amount to at least five percent of the total purchase price.⁴ If your contract caps penalties below five percent, or lets you recover the full deposit, the IRS treats it as an option to buy rather than a firm commitment. An option does not qualify.

Look for three things on your paperwork: the signing date, the amount you put down, and the specific consequences of cancellation. “Non-refundable deposit” is clear. A liquidated damages clause needs to work out to at least five percent of the vehicle price on its face. Vague language is where audits go badly.

The Vehicle Still Has to Qualify

The transition rule preserves your eligibility; it does not waive the underlying vehicle rules that were in force on September 30, 2025. Your car needs to meet all of them.

Battery capacity of at least 7 kilowatt-hours.⁵
Gross vehicle weight rating under 14,000 pounds.⁵
Final assembly in North America.²
A qualified manufacturer registered with the IRS that has reported the vehicle through the IRS Energy Credits Online portal.⁶

The manufacturer’s suggested retail price matters, not what you actually paid. Vans, SUVs, and pickup trucks are capped at $80,000 MSRP. Sedans, hatchbacks, and everything else are capped at $55,000.⁵

The $7,500 is split in half. Your vehicle earns $3,750 for meeting the critical mineral sourcing threshold, and another $3,750 for meeting the battery component threshold.² A vehicle that satisfies only one gets half. Whether a particular model qualifies for the full amount, half, or none is reported by the manufacturer.

Income Caps Still Apply

The transition rule does nothing for the income limits. Your modified adjusted gross income cannot exceed:

$300,000 for married couples filing jointly or a surviving spouse
$225,000 for head of household
$150,000 for single filers and all others

You may use whichever is lower: your MAGI for the year you take delivery, or the year before.² If you were over the cap in both years, the contract does not save you.

How Much You Actually Get

The credit is nonrefundable when claimed on your return. It reduces your federal income tax liability, but any amount above what you owe is lost. There is no carryover to a later year.² If you owe $4,000 in federal tax and qualify for the full $7,500, the credit zeroes out your bill and the other $3,500 disappears.

There is one workaround, and only if you used it at the point of sale: for vehicles placed in service after December 31, 2023, you could elect to transfer the credit to the dealer, who applied it as a reduction in your purchase price and collected the payment from the IRS.⁷ That transfer effectively makes the credit function as a refund regardless of your tax liability. You still have to report the transfer on your return and reconcile the advance payment.⁸ If you didn’t elect the transfer when you signed, you can’t switch to it later.

Filing and What to Keep

You claim the credit on Form 8936 (Clean Vehicle Credits), with a separate Schedule A (Form 8936) for each vehicle, attached to your Form 1040 for the year you place the vehicle in service.⁹⁸ Schedule A asks for the vehicle identification number, the date you placed the vehicle in service, and whether you transferred the credit to the dealer.¹⁰

The form does not currently include a field for the binding contract date. That does not mean the date doesn’t matter. The IRS may request a copy of your contract during processing to confirm acquisition before October 1, 2025. Keep these together with your tax records:

The signed purchase agreement, showing the signing date and either the non-refundable deposit language or the liquidated damages clause
Proof of payment on or before September 30, 2025 (bank record, credit card statement, dealer receipt)
The dealer’s time-of-sale report, which is what confirms the vehicle qualifies and which the dealer was required to submit through IRS Energy Credits Online¹¹

The Risk of Claiming Without a Qualifying Contract

If your contract does not meet the binding standard — a deposit that turns out to be refundable, a cancellation penalty under five percent — the credit is not available, and claiming it triggers accuracy-related penalties plus interest on the underpayment. Fabricating or backdating documents to fit the transition rule falls under the federal false-statements-on-a-tax-return statute, which carries up to three years in prison and fines up to $100,000 for individuals or $500,000 for corporations.¹²

The more realistic risk is honest ambiguity in the contract language. If you’re unsure whether your paperwork clears the five-percent threshold or whether your deposit is truly non-refundable, a tax professional reviewing the contract before you file costs a small fraction of what you stand to lose if the IRS disallows the credit later.

1
Congress.gov. H.R.1 – 119th Congress (2025-2026) – Text
2
Internal Revenue Service. Credits for New Clean Vehicles Purchased in 2023 or After
3
Internal Revenue Service. Credits for New Electric Vehicles Purchased in 2022 or Before – Section: What Is a Written Binding Contract?
4
Internal Revenue Service. Field Service Advice 200052001
5
Office of the Law Revision Counsel. 26 USC 30D – Clean Vehicle Credit
6
Internal Revenue Service. Clean Vehicle Credit Qualified Manufacturer Requirements
7
Internal Revenue Service. Frequently Asked Questions About Transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit
8
Internal Revenue Service. 2025 Instructions for Form 8936
9
Internal Revenue Service. Form 8936 – Clean Vehicle Credits
10
Internal Revenue Service. Instructions for Form 8936 (2025)
11
Internal Revenue Service. Clean Vehicle Credit Seller or Dealer Requirements
12
Office of the Law Revision Counsel. 26 USC 7206 – Fraud and False Statements