The majority of the tax provisions of One Big Beautiful Bill (OBBB) are beneficial for certain taxpayers. Ending clean vehicle tax credits will cause some taxpayers to lose federal tax credits.
Clean Energy Vehicle Credits End September 30, 2025
If you have been planning to buy a clean vehicle, you need to act soon if you wish to qualify for federal tax credits. Tax credits for both individuals and businesses are ending more than seven years earlier than they were originally scheduled to end due to One Big Beautiful Bill being signed into law. These tax credits now end September 30, 2025!
What Is a Clean Vehicle?
Per the IRS, a clean vehicle is one that gets plugged in (also known as an electric vehicle) or a fuel cell electric vehicle.
How to Qualify for the Tax Credit
Currently, if you buy a new clean vehicle for personal use, it can qualify you for the Clean Vehicle Credit. If you purchase a new vehicle, the credit is up to $7,500. Certain used electric vehicles can earn you a credit of up to $4,000. Tax credits are a dollar-for-dollar reduction in your tax bill, so these are substantial savings!
To qualify for the credit, the vehicle must meet several guidelines. To see if your vehicle qualifies, you can go to fueleconomy.gov. Further, the following income thresholds must be met:
Income Limits and Maximum Price for New Vehicles
Modified Adjusted Gross Income (MAGI) in the year of delivery (or the year before delivery) is no more than:
$150,000 if single,
$225,000 if head of household,
$300,000 if married filing jointly
Vehicle cost no more than
$55,000 if a sedan,
$80,000 if an SUV, pickup, or van
Income Limits and Maximum Price for Used Vehicles:
MAGI is no more than:
$75,000 if single,
$112,500 if head of household,
$150,000 if married filing jointly
Vehicle cost no more than $25,000
Commercial Electric Vehicle Credit
In the case of businesses and tax-exempt organizations, the Commercial Electric Vehicle Credit allows a credit up to $7,500 for vehicles under 14,000 pounds, and up to $40,000 for vehicles weighing 14,000 pounds or more. There are no income limits or price caps for businesses to qualify, but there are several eligibility requirements that must be met. You can go to fueleconomy.gov to see if your vehicle qualifies.
Point-of-Sale Rebates
Instead of waiting to claim the tax credit when filing your taxes, you could have taken it at the time of purchase. This would have reduced the price you paid for the vehicle. You cannot have both a tax credit and a point-of-sale rebate for the same vehicle.
Takeaway
These federal tax credits end September 30, 2025, so you must purchase and take delivery of your vehicle by then.
Taxpayers considering clean vehicles should act quickly to take advantage of the credits before they expire.