The Internal Revenue Service is offering some leeway for consumers rushing to buy an electric vehicle before federal tax credits expire next month.
The IRS last week modified the phase-out of the electric vehicle tax credits mandated by President Donald Trump’s One Big Beautiful Bill Act, terminating billions of dollars in clean energy tax credits that the Biden administration enacted through the 2022 Inflation Reduction Act.
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The Republican megabill, signed by Trump on July 4, eliminated the IRA’s EV tax credits, which offered consumers up to $7,500 for purchasing a new EV and $4,000 for a used one.
The credits are set to expire on Sept. 30, but the IRS provided some breathing room for consumers looking to purchase an EV.
The IRS stated that if a consumer has a written binding contract in place and payment has been made on or before the expiration date, then the buyer may still claim the credit. That means buyers will be able to receive the tax credit even if the car is delivered after the Sept. 30 deadline.
That could be a major boost to automakers, who are not able to ramp up production on short notice to meet any excess immediate demand caused by the fast-approaching deadline. Under the new rules, though, they will be able to manufacture and then sell cars that qualify for the credits beyond the deadline, as long as a contract is in place. The guidelines do not set a deadline for such transactions.
“If a taxpayer acquires a vehicle by having a written binding contract in place and a payment made on or before September 30, 2025, then the taxpayer will be entitled to claim the credit when they place the vehicle in service (namely, when they take possession of the vehicle), even if the vehicle is placed in service after September 30, 2025,” the IRS wrote. “Taxpayers should receive a time of sale report from the dealer at the time they take possession or within three days of taking possession of the vehicle.”
Biden’s EV tax credits were intended to encourage consumers to purchase battery-powered vehicles. But Trump and Republicans have criticized the tax incentives and regulations meant to boost EVs as costly and coercive.
“There has never been a better time to get a great deal on an electric vehicle,” Ingrid Malgren, senior policy director from Plug In America, said in a statement. “This updated guidance clarifies that if you order a vehicle from a dealer or manufacturer, sign a contract, and put down a deposit, you can benefit from the tax credits even if the vehicle is delivered after September 30.”
“This is great news for drivers interested in saving on fuel costs, minimizing time and money spent on maintenance, and having a superior driving experience,” she added.
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Last month, sales of new EVs were up 26.4% month over month and 19.7% year over year, according to Cox Automotive. Used EV sales in the same month rose to 23.2% month over month and 40% year over year. Sales grew just two months before the tax credits were set to expire as automakers were offering deals to draw in buyers.
With the tax credits set to expire after September, industry experts believe EV adoption will likely decline. However, automakers are already adapting to these changes. For instance, Ford has announced plans to produce a midsize pickup truck priced around $30,000 by 2027.
“The legacy automakers in this country cannot afford not to transition to EVs,” Malmgren told the Washington Examiner last week. She added that countries, especially China, are pushing for more EV adoption globally.
“The bottom line is the world is transitioning to electric vehicles,” she added.