Just over a month remains for car shoppers to take advantage of the EV tax credit, a relatively new incentive that was terminated by the sweeping tax law President Donald Trump signed in July.
For shoppers considering electric vehicles, claiming the EV tax credit while the opportunity is still available could save thousands of dollars. Officially, the last day to claim the tax credit is Sept. 30, but the IRS put out an update last week allowing extra time for some shoppers. According to the new IRS guidance, a buyer just needs a “written binding contract in place” by the final day of the credit — it’s fine to take possession of the vehicle at a later date.
Since January 2023, the EV tax credit has provided a discount of up to $7,500 — available at the time of purchase — for qualifying electric vehicles and eligible buyers. A used EV tax credit of up to $4,000 that was implemented at the same time is also being terminated on Sept. 30.
After the EV tax credit was expanded in August 2022 with the Inflation Reduction Act, there was a sense in the industry that an EV revolution was underway. Automakers like Hyundai and General Motors were releasing new electric models, and battery technology was improving while electric prices were becoming more affordable. However, three years have passed and most American consumers are still showing a preference for gas and hybrid cars. With the end of the tax credit around the corner, EV adoption could soon slow to a halt.
One month remains to claim the EV tax credit
Car shoppers appear to be jumping on the last chance to get an EV with the government-subsidized discount.
Cox Automotive reported a 26.4% spike in EV sales from June to July, making it the second best month for EV sales on record. In the same span, the supply of EVs shrunk 32.3%, according to the firm. The last-chance rush to buy an EV appears to be pushing up prices by about $2,000 on average, according to the car shopping app CoPilot.
Looking for an EV in the final weeks of summer? Shoppers have over 20 electric models to choose from that are eligible for the tax credit. Vehicle eligibility factors include the “MSRP, its final assembly location, battery component and/or critical minerals sourcing,” according to a government website. Requirements include final assembly of the vehicle taking place in North America and the sticker price not exceeding $80,000 on SUVs, vans and trucks or $55,000 for other vehicles. To qualify, a buyer’s income must be below $150,000 for single filers (or $300,000 for couples).
Major discounts are also available on EV lease deals thanks to tax credit subsidies. For EV leases, the eligibility rules around the tax credit are actually looser.
Car shoppers are scooping up EVs
EV demand is expected to be strong until the tax credit is gone. Then, the sales outlook weakens.
“With the IRA tax credit set to expire at the end of September, urgency is likely to remain high,” Stephanie Valdez, director of industry insights at Cox Automotive, wrote in an EV market report last week. “As policy support winds down, the market’s ability to respond to real-time demand and brand-level dynamics will be critical in shaping the next phase of growth.”
The price of a new EV was around $55,700 in July, according to Cox Automotive, and EVs were about $7,600 more expensive on average compared to other cars.
The tax credit has been made up a lot of that price difference. But without it, slower EV sales could force increased discounting from automakers and dealers this winter. Still, no one can predict the future, so if you’re planning to buy an EV, your best bet is to shop before the credit disappears.
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