If you’ve been considering buying an EV and want a good deal thanks to government tax credits, you have some added homework to.
That’s because a big tax break that could save you money faces an uncertain and confusing future in the Trump administration.
Under the Inflation Reduction Act of 2022, many consumers are eligible for an up to $7,500 tax credit if they buy certain models of electric vehicles. However on his first day in office, President Donald Trump signed the “Unleashing American Energy” executive order. It stated U.S. policy was now “considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies.”
Because the tax credits were passed by Congress, only Congress can withdraw them. However the president’s executive orders have had “a messy and unclear effect,” Elaine Buckberg, a senior fellow at Harvard University’s Salata Institute for Climate and Sustainability, said on a Harvard media call this week.
“My team has actually spoken to a number of dealers across brands,” said Buckberg, former chief economist of General Motors. They found confusion and in some cases what’s effectively a rollback of the tax credits that up until January car companies had been making available.
Tax credit availability for EVs
Wood Mackenzie, an energy research and consulting group, estimates these changes could have a significant impact on the EV market, though by how much has yet to be determined.
There are currently two types of tax credit for consumers who want an electric vehicle, 30D for purchasers and 40W, which is a commercial credit available to people who lease.
For the past year, leasing an EV allowed consumers to sidestep the paperwork and some of the restrictions for the tax credit. Many dealers baked the savings into the vehicle’s cost.
That’s one of the reasons 46% percent of Americas who drive EVs lease instead of buying, according to Experian. That compares with just 24% of new cars being leased overall.
For now, people who lease EVs seem to still be getting the credits, Buckberg said.
“Those leases are generally being extended by automaker’s own finance companies, therefore by big corporate entities that have government relations programs that have probably been able to clarify what exactly is going on,” she said.
“They are taking on the risk, however small or large they measure it, of getting repaid by the IRS,” she said.
Results for Americans who want to buy an EV are more mixed at dealers, she said. For the past year many dealers were giving point-of-purchase rebates by having buyers transfer the tax credit to them. “Now they’re saying, ‘We’re not taking that risk,'” she said.
One dealer her team spoke with said they were advising potential buyers to contact their accountants.
For buyers who try to claim the rebate on their taxes, which won’t go through until April of 2026, the law could change before they had a chance to file for the rebate.
“So there’s a chilling effect,” Buckberg said.
If or when Congress acts, it will take time. Whether the credit extends for the rest of 2025 or goes away immediately is up to them, said Mark Luscombe, principal analyst with Chicago-based Wolters Kluwer Tax & Accounting.
“The typical thing they would do would be to state an effective date for the revocation of the credit. That could be January 1, 2026 or it could be the date the legislation is enacted, they sometimes do that as well,” he said.
Should you buy an EV ?
Whether or not you should buy an EV depends on multiple factors: How much you drive, where you live, what kinds of vehicles you love to drive and how much you hate going to the gas station. While not for everyone, they do make sense for many Americans.
Access to the $7,500 tax credit isn’t as much of a deal breaker it might seem because EVs aren’t as expensive as they used to be.
Today there are many inexpensive and mid-range EVs on the market, with more coming every year. The Nissan Leaf starts at around $30,000, the Hyundai Kona Electric $34,000, Chevrolet Equinox $35,000 and the Hyundai Ioniq 6 at $39,000.
That said, the list price of any car is not what it actually costs to own it. And this is where EVs can be money-saving for many people even if the initial price is higher.
It’s not the sticker price of the vehicle that matters, as 90% of Americans finance or lease their cars or trucks, but the monthly payment, said Robbie Orvis, senior director of modeling and analysis at Energy Innovations, an energy think tank based in San Francisco.
“You may have a higher monthly payment but that difference is more than offset by your monthly fuel, operating and insurance savings,” he said.
Another point is that few Americans buy vehicles based strictly on economics, so the question “does it make economic sense?” isn’t that useful, said Ivan Drury, director of insights for Edmunds.com.
“Autos are probably one of the most emotional purchases we make,” he said.
That’s why cars and trucks come in so many styles, makes and models. What vehicle you drive depends on cost but also how you see yourself, said Drury.
“If it were only about economy, you’d buy a RAV 4 or a Toyota Camry and that’s it,” he said. “They check all the boxes.”
For those who want to drive something beyond those two, the answer to the question “What’s the best vehicle to drive” comes down to an intricate alchemy of what makes you feel good, what everyone around you is driving, what you can afford, what you’ve driven or test-driven, what works for your driving needs and even your political leanings.
Despite changes to federal support, EVs aren’t going away. In December, one-in-four vehicles purchased by Americans was either electric or hybrid, said Drury. Globally, EV sales were up 25% in 2024, according to EV research firm Rho Motion.
“The EV market is evolving quickly,” said Orvis. “It’s gone mainstream.”
