If you were planning on using Uncle Sam’s money to help pay for that new Tesla or Rivian, I’ve got some bad news. The $7,500 federal EV tax credit—a staple of the American car market for years—is officially a thing of the past.
It’s over. Gone.
Last year, the Trump administration and a Republican-led Congress made good on a major campaign promise. They passed the One Big Beautiful Bill Act (OBBBA), which effectively nuked the consumer-facing incentives for electric vehicles. While there was a lot of chatter during the transition about if they would do it, the reality hit fast. For most people, the credit evaporated for any car purchased after September 30, 2025.
The Rug Pull: What Happened to the $7,500?
Basically, the new law didn’t just trim the edges; it took a sledgehammer to the Inflation Reduction Act’s (IRA) clean energy provisions. The transition team argued that the government shouldn't be "picking winners and losers" in the auto industry. They also claimed the credits were a "massive subsidy for the wealthy."
Honestly, the speed of the repeal caught a lot of people off guard.
One day you could get a point-of-sale discount at the dealership, and the next, you’re looking at the full MSRP. This wasn't just a "transition team" idea anymore—it became the law of the land on July 4, 2025, when the President signed the OBBBA.
The impact was immediate. By November 2025, U.S. electric vehicle sales plummeted by 41% compared to the previous year. You can’t just remove a $7,500 discount from a $50,000 car and expect the market to stay the same. People are price-sensitive. Go figure.
Who Is Actually Impacted?
It’s not just the guy buying a Model 3. The repeal hit two main areas:
- New Clean Vehicle Credit (Section 30D): The big one. Up to $7,500 for new EVs.
- Used Clean Vehicle Credit (Section 25E): A smaller, but still vital, $4,000 credit for second-hand EVs priced under $25,000.
The administration basically argued that if EVs are truly the "future," they should be able to compete on their own merits without taxpayer training wheels. But critics, including some heavy hitters in the auto world, say this move hands the advantage straight to Chinese manufacturers who are heavily subsidized by their own government.
The Detroit Dilemma
Carmakers like Ford and GM are in a tough spot. They’ve already sunk billions into battery plants in places like Kentucky, Tennessee, and Michigan. Ford’s CEO, Jim Farley, has been pretty vocal about the risk here. If the demand for EVs dries up because they’re too expensive for the average family, those multibillion-dollar factories become very expensive paperweights.
Is Anything Left? (The Loophole Problem)
You might have heard about the "leasing loophole." Under the old IRA rules, commercial vehicles (including leased cars) didn't have the same strict "made in America" requirements as purchased ones.
The OBBBA tried to tighten this, but the regulatory battle is still raging. Some commercial credits—specifically for heavy-duty trucks—have different phase-out dates. However, for the average person looking to lease a Kia or a Hyundai, those "hidden" $7,500 discounts that dealers used to bake into the lease payments are mostly dried up now.
States Are Fighting Back
If you live in a "blue" state, you might have some luck. California, for instance, isn't taking this lying down. Governor Gavin Newsom recently proposed a $200 million state-level rebate program to try and fill the hole left by the federal government.
It’s not as big as the federal credit, but it’s something. Michigan is also seeing a weird side effect: EV registration fees are actually spiking in 2026 to make up for lost gas tax revenue. It’s sort of a double whammy for EV owners—you lose the tax break, and you pay more to the DMV.
What Most People Get Wrong About the Repeal
A lot of folks think the credit is just "paused" or that it might come back if the economy shifts. That’s unlikely. The OBBBA made these changes permanent. To bring the credit back, you’d need a brand-new act of Congress and a President willing to sign it.
Also, don't assume your "binding contract" from 2024 will save you. The IRS has been very picky about what counts as a completed purchase. If you didn't have a signed agreement and money down before the 2025 deadlines, you’re likely out of luck.
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Actionable Next Steps for Car Buyers
So, what do you do if you still want an EV in 2026?
- Check State Incentives: Look at your state's energy office website. States like California, Colorado, and Massachusetts still have their own programs.
- Negotiate Harder: Now that the "easy" $7,500 is gone, dealers are sitting on inventory. The "fed discount" is gone, but the "dealer desperation" discount might be just starting.
- Watch the Used Market: Prices for used EVs are falling fast because the new ones aren't moving. You might find a three-year-old Tesla for less than $25,000, which is still a great deal even without the $4,000 tax credit.
- Focus on TCO (Total Cost of Ownership): Stop looking at the sticker price alone. Calculate your gas savings over five years. Sometimes the math still works out in favor of electric, especially if you can charge at home for cheap.
The "Golden Age" of EV subsidies is officially in the rearview mirror. It’s a tougher market now, and buyers have to be way more strategic. If you're waiting for the federal government to help you buy a car, you're going to be waiting a very long time.