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Prospective car buyers considering an electric vehicle may need to act fast to get a Biden-era EV tax credit worth up to $7,500, due to the likelihood that President-elect Donald Trump and Republicans on Capitol Hill will axe those savings in tax negotiations next year, according to auto and legal experts.
“There’s no question there’s real risk in the EV credit going away” in 2025, said Jamie Wickett, a partner at law firm Hogan Lovells who specializes in federal tax policy, energy and the environment.
“If you’re a consumer in the market for an EV, I would without a doubt push that into 2024, if at all possible — whether an outright purchase or a lease — just to reduce the risk of the credit going away,” Wickett said.
The Inflation Reduction Act offered federal EV tax breaks through 2032 for consumers who buy or lease new or used EVs, including all-electric and plug-in hybrid electric vehicles.
The credit is worth up to $7,500 for new cars and $4,000 for used ones.
The IRA, which President Joe Biden signed in 2022, also made it easier for consumers to access the savings by allowing dealers to pay the funds upfront at purchase instead of waiting until tax season.
Trump pledged to ‘cancel the electric vehicle mandate’
The Trump transition team reportedly aims to eliminate the EV credits to raise money for a broad package of tax cuts Republicans are expected to pursue next year.
Trump’s campaign agenda vowed to “cancel the electric vehicle mandate.”
Elon Musk, chief executive officer of Tesla and an influential Trump supporter, has also called for an end to the credits and said killing the subsidies would hurt the EV maker’s U.S. competitors.
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Karoline Leavitt, a spokeswoman for the Trump-Vance transition, said the president-elect would follow through with his pledge.
“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail,” Leavitt said in an email. “He will deliver.”
President-elect Donald Trump and Elon Musk talk ring side during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.
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There’s considerable uncertainty over the contents of a future Republican tax package and the fate of the EV credit, experts said.
Extending a slew of expiring income tax cuts and fulfilling various Trump campaign promises like slashing taxes on tips, Social Security benefits and overtime pay, for example, could cost about $7.8 trillion over 10 years, the Tax Foundation estimates.
Repealing all the IRA’s green energy tax credits, including the EV credit, would offset that cost by about $921 billion, it said.
Waiting is ‘too big of a gamble’
Laura, a 44-year-old living in Charlotte, North Carolina, has been looking to buy a plug-in hybrid for several years due to their environmental benefits and cost savings on gasoline.
She was getting ready to buy one thanks to the $7,500 EV credit, which made the vehicles more affordable, she said.
Laura, who asked not to use her last name, is now rushing to buy a 2025 Chrysler Pacifica Hybrid by year’s end because the credit might go away. To wait and buy in 2025 is “too big of a gamble” given Trump’s antipathy toward the EV credit, she said.
Local car dealers have informed Laura that she qualifies for the full $7,500 credit, which carries some restrictions depending on car model and buyers’ income, for example.
There’s no question there’s real risk in the EV credit going away.
Jamie Wickett
partner at law firm Hogan Lovells
However, dealers in her area don’t have many vehicles available right now, she said — and have told her that’s because consumers are scrambling to buy EVs in case the tax break disappears.
Dealers are hopeful they’ll have more inventory in the coming weeks, she said.
Laura said she wouldn’t buy the car without the tax credit.
“If it’s not going to be in by the end of December 2024, then that changes everything [for me],” she said.
She fears Trump and Republicans on Capitol Hill might try to claw back the $7,500 tax credit retroactively, for any consumers who get an EV in 2025 or beyond.
The irony is their “complete disdain for the tax credit” is what prompted her to try to get an EV more rapidly, she said.
Take advantage of a ‘known entity’
“I would encourage consumers to take advantage of the tax credit while it’s a known entity,” said Ingrid Malmgren, senior policy director at Plug In America, a group that advocates for the transition to EVs.
Most consumers have opted to get the credit as a discount at the point of sale, according to the U.S. Treasury Department. The car dealer essentially issues an advance tax credit to consumers, and the Treasury then refunds that advance payment.
Consumers who sign a lease agreement by year’s end would be able to lock in their savings contractually over a multiyear lease term, even though the term would overlap with Trump’s presidency, Malmgren said.
But look over the agreement terms. One caveat might be if a dealer were to write a clause into the lease contract stipulating that if the tax credit were denied then the consumer’s monthly lease payments would increase, Wickett said.
He expects Republicans to pass a tax package by the end of 2025. In the most likely scenario, such a law would probably phase out the federal EV credit in 2026 or 2027, instead of turning off the spigot retroactively for all 2025 purchases, Wickett said.
“No one knows for sure,” he said. “But I think it’s fairly clear the Republicans are going to find a way to pass a major tax bill.”
