How the current Federal EV Tax Credit Works

A Critical Deadline for EV Buyers

The electric vehicle market in the United States has been significantly shaped by federal incentives aimed at accelerating the transition to cleaner transportation. One of the most impactful programs—the federal EV tax credit—is heading toward a major milestone. On September 30, 2025, key portions of this credit are set to expire. For consumers considering the switch to electric, this deadline represents more than just a date. It marks a shift in affordability and accessibility that could affect tens of thousands of potential EV owners.

Through this guide, you’ll learn about the current tax credit landscape, eligibility requirements, qualifying vehicles, and what happens after the credit ends. We'll also explore how these federal incentives stack with state and utility rebates, and why making a purchase sooner rather than later could save you thousands of dollars.

Why September 30, 2025, Is So Important

Unlike many tax programs that base eligibility on when you make a purchase, the federal EV tax credit hinges on when you take delivery of the vehicle. That means the car must physically be in your possession—not on order or in transit—by the September 30, 2025 deadline. This distinction is critical because many shoppers wait until the last minute, only to be caught in a wave of backorders, production delays, and overwhelmed dealerships.

As we get closer to the expiration date, expect to see vehicle availability shrink and delivery times extend. High-demand models may be particularly hard to secure, and dealerships may adjust pricing as demand spikes. If you’re aiming to qualify for the full benefit, acting early gives you the greatest chance of avoiding these headaches and securing the maximum incentive.

How the Federal EV Tax Credit Works

There are three main types of federal incentives for electric vehicles as of mid-2025: a $7,500 credit for new EVs, a $4,000 credit for used EVs, and a $7,500 incentive applied to EV leases. Each of these options has its own set of rules, and not every vehicle or buyer will qualify for every credit.

New EV Credit – Up to $7,500

New electric vehicles can qualify for a credit of up to $7,500. This total amount is split evenly between two key criteria: the sourcing of critical minerals, and the sourcing of battery components. If your vehicle meets only one of those two requirements, you may still qualify for $3,750. But to receive the full credit, both standards must be met. These rules are part of the federal government’s broader effort to support domestic manufacturing and supply chains.

Additionally, the vehicle must undergo final assembly in North America, and its price must fall within the designated cap: $55,000 for sedans and other passenger cars, and $80,000 for SUVs, trucks, and vans.

Used EV Credit – Up to $4,000

For those shopping in the pre-owned market, the federal government offers a used EV tax credit worth up to $4,000 or 30% of the vehicle’s sale price, whichever is lower. To qualify, the used EV must be at least two years old, purchased through a licensed dealer, and priced under $25,000.

Income thresholds for used EV buyers are also lower than for new vehicle purchasers. Individuals earning under $75,000 annually (or $112,500 for heads of household and $150,000 for joint filers) may qualify. This makes the credit more accessible to lower- and middle-income families who want to join the EV movement without breaking the bank.

Lease Incentives – A Unique Advantage

One of the most notable loopholes in the current structure of federal EV credits is that leasing offers more flexibility. When a vehicle is leased, the tax credit is claimed by the lessor (usually the dealership), which can pass the value on to the lessee through reduced monthly payments or a lower down payment. In this case, there are no price caps, no income restrictions, and no battery sourcing requirements.

For many consumers who do not qualify for the purchase credit due to income or vehicle cost, leasing may still provide access to the $7,500 benefit.

Who Can Claim the EV Tax Credit?

Eligibility for the federal EV tax credit depends on several factors, including income level, vehicle characteristics, where it was manufactured, and how the battery was sourced.

For new EV purchases, individuals earning up to $150,000 per year may qualify, while heads of household are limited to $225,000 and joint filers to $300,000. Vehicles must also fall under the MSRP cap and meet battery sourcing requirements tied to U.S. or trade partner origin.

Used EV buyers face a lower income ceiling, with individual eligibility capped at $75,000 annually, and the vehicle itself must be under $25,000 in price and at least two years old. Importantly, it must be purchased from a dealership—not through a private sale—to qualify for the credit.

As previously mentioned, leases are exempt from many of these rules. Because the tax benefit is claimed by the lessor and passed to the customer, this route opens the door for a broader segment of buyers.

Point-of-Sale Credits: Immediate Savings at the Dealership

Another game-changing update to the federal EV tax credit system is the introduction of point-of-sale transfers. This means that instead of waiting to receive the credit when filing taxes the following year, eligible consumers can now receive the value of the tax credit immediately at the dealership, effectively reducing the vehicle’s purchase price.

This streamlined approach helps buyers access savings more directly and eliminates the need to wait months for a refund. It also helps dealers close sales more easily, as they can clearly demonstrate the impact of the incentive during the transaction.

Which EV Models Qualify as of Mid-2025?

Model eligibility changes frequently, based on automakers’ compliance with manufacturing and battery requirements. As of summer 2025, several new vehicles are widely expected to qualify for all or part of the $7,500 credit. These include the Tesla Model 3 and Model Y, Ford F-150 Lightning, Chevrolet Equinox EV, and Cadillac LYRIQ.

For used EVs, vehicles like the pre-2022 Tesla Model 3, Chevrolet Bolt, Hyundai Kona Electric, and Kia Niro EV are commonly found below the $25,000 price threshold and have wide availability at licensed dealerships.

Because eligibility can fluctuate, it’s important to check with your dealer or consult the IRS’s EV credit listing before finalizing a purchase.

What to Expect After the Credit Ends

If the credit expires on schedule at the end of September 2025, buyers who miss the deadline could face significantly higher costs. New EV prices could effectively rise by $7,500, and used vehicles by $4,000. This price increase could reduce affordability for many households and limit broader EV adoption.

Industry analysts are already forecasting a drop in EV registrations, with some estimates suggesting a 27% decline after the incentive disappears. Without this financial support, the economic case for EVs becomes less compelling, especially for budget-conscious buyers.

In response, dealerships may attempt to push remaining inventory or offer special lease programs in an effort to maintain demand. However, these promotions are likely to be limited and heavily competitive.

Stacking Incentives: Federal, State, and Utility Rebates

The good news for EV buyers is that federal incentives aren’t the only source of financial support. Many state governments and utility companies offer additional rebates and tax benefits that can be combined with federal programs.

In New Jersey, for example, residents can take advantage of the Charge Up NJ program, which offers up to $4,000 in state rebates for eligible EV purchases. This program remains active and is separate from federal incentives, meaning buyers could potentially receive up to $11,500 in combined savings for a new vehicle.

Additionally, utility programs like those offered by PSE&G provide further rebates for installing home charging infrastructure. Customers may also be eligible for a $250 rebate toward the purchase and installation of a Level 2 charger. 

When stacking these incentives, buyers can significantly reduce both the upfront cost of the vehicle and the expense of at-home charging.

Why You Should Start Shopping Now

With the expiration date approaching, now is the optimal time to explore your EV options. As we near the September 2025 deadline, dealerships will see increased foot traffic, manufacturers will face production constraints, and delivery timelines may become unpredictable.

Starting early gives you time to research qualifying vehicles, evaluate financing options, claim available rebates, and schedule your home charger installation. It also ensures that you don’t miss out on the point-of-sale savings that can dramatically lower your costs upfront.

Get Charging Ready with PowersourceEV

If you're planning to drive electric, you’ll want a fast, reliable way to charge your vehicle at home. PowersourceEV specializes in home charger installation and can help you choose, install, and apply for rebates on a qualifying Level 2 charger. Their team handles everything, from equipment selection to paperwork, ensuring a smooth transition into EV ownership.

The Lasting Benefits of Driving an Electric Vehicle

Switching to an electric vehicle is not just a short-term financial decision—it’s a long-term investment in sustainability, efficiency, and overall driver satisfaction. While the federal tax credit can help you save thousands of dollars upfront, the ongoing advantages of EV ownership extend far beyond the purchase.

First, EVs offer significantly lower fueling costs compared to gas-powered vehicles. Electricity is generally cheaper per mile, and many utilities offer special time-of-use rates that make overnight charging even more affordable. Over time, this can lead to hundreds or even thousands of dollars in annual fuel savings.

Second, maintenance costs are typically lower for EVs. With fewer moving parts, no oil changes, and no exhaust system, EVs are mechanically simpler and less prone to costly repairs. This means fewer trips to the mechanic and more confidence in your vehicle’s reliability.

Third, electric vehicles contribute to a cleaner environment. By reducing tailpipe emissions—or eliminating them altogether—EVs help improve air quality and reduce greenhouse gas output. For drivers who want to align their transportation choices with environmental values, going electric is one of the most impactful steps you can take.

Lastly, driving an EV often comes with added perks, such as access to HOV lanes, preferred parking spots with charging access, and eligibility for local incentives that further increase their appeal.

In short, electric vehicles deliver on performance, efficiency, and environmental responsibility—all while offering a quiet, smooth, and enjoyable driving experience.

Why Every EV Owner Should Have a Home EV Charger Installed

While public charging infrastructure continues to expand, nothing compares to the convenience and cost-efficiency of charging your EV at home. Installing a Level 2 charger in your garage or driveway allows you to fully recharge your battery overnight and avoid the hassle of waiting at public charging stations. It transforms your home into your personal fueling station, available whenever you need it.

With a certified EV electrician, like the installer network at PowersourceEVEV, the process is simple and turnkey. You’ll receive expert recommendations on which charger is best suited for your vehicle, your home’s EV electrical setup, and your daily driving habits. A certified installer also ensures the charger is safely and correctly wired to your panel, adheres to local codes, and qualifies for available utility rebates.

In many regions, including New Jersey, homeowners can receive up to $250 in rebates just for installing a qualifying Level 2 charger. When combined with time-of-use electricity plans, a home charger can dramatically lower your total cost of EV ownership.

Home charging also helps extend the lifespan of your EV battery. Level 2 chargers offer a consistent and stable flow of electricity, which is gentler on battery cells than rapid DC fast chargers used in public settings. For those planning to keep their EV for years—or even pass it on to another driver in the household—this can translate into better battery performance and longevity.

Choosing a trusted EV installer helps simplify the process from start to finish, reduces installation delays, and ensures you maximize every available incentive. With a home charging setup, your EV will always be ready to go when you are, fully charged, cost-efficient, and emissions-free.

Don’t Miss the Deadline

The federal EV tax credit is one of the most powerful tools available to make electric vehicles more affordable for American drivers. But the clock is ticking. If you want to take advantage of up to $7,500 in savings—or even more when combined with state and local programs—you’ll need to act before September 30, 2025.

Whether you’re interested in a new EV, a used model, or a flexible lease, the incentives are strongest right now. Start your EV journey today, and don’t leave money on the table. For home charging solutions, we hope you consider us!