The “greener, cleaner” electric vehicles or EVs, as they are popularly known, are becoming more and more popular. Their rise in demand can be credited to the numerous advantages they offer when compared with gas-powered vehicles.
For an easier transition, many states and the federal government offer some tax credits and rebates. Unfortunately, most of these subsidies will terminate in 2025. If you were considering transitioning to an EV, now is the best time to act.
This article will prepare you for everything you need to do about the tax credits and incentives. You are about to know the expiration consequences and how these incentives will affect you. As a bonus, I will explain what options may be available post 2025.
Understanding EV Tax Credits & Incentives
But before we discuss the expiration of these incentives, it is necessary to discuss the workings of EV tax credits and rebates.
What Are EV Tax Credits and Incentives?
Tax credits and incentives relevant to electric vehicles (EVs) are benefits or rebates aimed at reducing the cost of owning EVs. Price reductions and purchase incentives (subsidies) are offered to make it easier to purchase EVs as compared to gasoline-powered vehicles.
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Federal EV Tax Credit: This is available for all US citizens and is definitely the most popular as it provides up to $7,500 in discounts for newly purchased EV.
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State-Level Incentives: Many states have individual tax subsidization policies, providing state level rebate and spending based subsidies also known as sales tax allowances or direct grants for EV purchases.
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Utility Incentives: Many utility providers offer rebates on installation of EV charging stations as well as lower electricity rates for charging EVs at non-peak times.
Even though the total savings on maintenance and refueling are still significant, these incentives aim to make owning EVs more affordable given the initial cost which is generally far higher than traditional vehicles.
Types of EV Incentives Available
Federal EV Tax Credit
Under the current regulations, a tax credit of up to $7,500 is available for qualifying new electric vehicles (EVs). It is important to note that this tax credit comes with restrictions for certain makes and models, which encompass the size of the battery, where the vehicle was manufactured, and some other criteria.
A major point to note is that the tax credit starts tapering off after the manufacturer crosses 200,000 selling threshold eligible EVs, which has already frustrated companies like Tesla and General Motors.
State-Level Incentives
Joining the likes of California, New York, and New Jersey, some states offer their own custom tailored EV incentives. Besides these, other states provide additional rebates, tax credits, and even exemptions from vehicle registration fees. There are also states that provide aid for homechargeable EV chargers.
Utility & Charging Infrastructure Incentives
Numerous utility companies provide rebates to cover a portion of the expenses incurred in the installation of a charging station at home. There’s also the case that some of the utilities will lower the cost of electricity for EV owners who charge the vehicle during off-peak hours, thus, reducing the charging costs.
The Impact of the 2025 Expiration on EV Buyers and Owners
The end date of federal and state EV incentives will be in 2025, and this is bound to affect current and prospective EV owners. Regardless, there is a chance that the programs will alter the financial framework of EV purchases.
What Happens After 2025?
Once the incentives elapse after 2025, a prospective buyer will not be eligible to claim the federal tax credit for purchasing an EV. This could result in a higher EV purchase, which will drive value further away from prospective buyers. This specifically will lead to less flexible pricing structures and many buyers being driven away.
It is possible that potential buyers will look for futuristic and different strategies to make the purchase, as there will be no incentives to fall back on. Additionally,subsequently the intent to subsidize vehicle prices may not be as strong either, which in turn, minimizes the price subsidizes and captures buyers further away.
How the Expiration Will Affect EV Prices
Most likely the expiration of tax credits alongside the incentives will result in shifts moving EVs farther away from the EVAP. While the incentive does support in alleviating the burden from the initial cost of EVs, once they are annulled, it is safe to assume the price of EV cars will increase drastically.
As a result, industry analysts believe the lack of competitive intention will drive upwards of new vehicle purchases to increase by thousands of EV’s dollars.
New price increases might be balanced out by the growing adoption rate of EVs and advances in battery technology. A positive shift in the manufacturing processes of EVs alongside advances in technology could result in making EVs more accessible in the future.
The Effect on Used EV Buyers
The rebate’s termination will have an impact on the market for used EVs. As there are no federal incentives available for purchasing used EVs, other than some state level ones, the removal of these incentives can transform used EVs into high-priced commodities. Demand for affordable EVs might drive the prices up due to surge in demand, making it difficult for buyers to find suitable alternatives.
Key EV Tax Credits and Incentives Expiring in 2025
Several significant tax credits and incentives will be due to phase out in 2025. These are the most important ones that you need to understand along with their impacts.
Federal EV Tax Credit Details Expiring
Of all the incentives given to buyers of electric vehicles, the federal EV tax credit seems to have the most value when it comes to buying new electric vehicles. A consumer is able to claim as much as $ 7,500 for acquiring a newly purchased electric vehicle but this is only available until 2025.
Expirations mean if you are planning to buy an electric vehicle up to 2025, you should do it sooner than later to fully utilize the tax benefits that are available.
State-Specific Incentives Expiring
In addition to the federal credit, many states offer their own incentives to help reduce the cost of EV ownership. For example:
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California: California provides rebates for the purchase of electric cars through the CVRP. This program may be terminated or modified after 2025.
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New York: The state has a rebate program for EVs and is expected to be impacted by federal changes.
Don’t forget to check what deals and incentives your state has to offer and at what time will they expire. These types of programs can change at any moment so keep an eye out.
Incentives for EV Charging Infrastructure
After 2025, the home charging stations and public charging infrastructure incentives may be cut or abolished entirely. Currently, some states provide monetary benefits for the installation of a charging station at a residence, or for businesses to construct public charging points.
These initiatives may be shelved as the federal tax incentives wane. This will create difficulties for EV users to conveniently access affordable charging stations.
Preparing for the Expiration: What Can You Do Now?
If you are planning to buy an Electric Vehicle, or install a charging station for one, it is crucial to get the necessary incentive policies in place that are unlikely to be around for much longer.
The Best Time to Buy an EV: 2023 and 2024
The ideal window to purchase an EV, but it is bound to shift significantly after the two-year mark, is before 2025. Buying in this period ensures access to the entire federal tax credit alongside ev-specific incentives from individual states. Promos are also likely to surface from EV manufacturers during this period as a desperate attempt to boost flagging sales prior to the expiration of tax credits.
How to Take Advantage of Current Tax Credits
Here’s the steps to take in order to enjoy your federal tax credit:
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Ensure your vehicle is eligible: The EV in question must fulfill certain conditions such as having a minimum battery size and being purchased ‘brand new.’
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Claim the credit during tax season: To get the credit, be sure to submit a tax return and fulfill the required processes. It’s essential to have Form 8834 on hand to receive the federal EV tax credit.
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Verify state-level incentives: Ensure that you check on your state criterion of EV incentives and apply for the peripheral incentives if they exist.
Looking Into Future Alternatives After Expiration
Although the expiration of the incentives appears intimidating, saving on electricity vehicles may be possible through other means in the future:
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Emerging Federal Programs: The federal government might announce changes or introduce certain tax incentives in the next few years for the adoption of electric vehicles (EVs) after 2025.
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State and Local Initiatives: States could create their own EV tax incentives or rebate programs to fill the void created by the loss of federal support.
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EV Manufacturing Changes: It is possible that other manufacturers will begin subsidizing costing procedures, therefore offering their own incentives to customers.
You can also read How much does it really cost to own an EV in 2025?
What Are the Alternatives After 2025?
The removal of tax credits in 2025 will certainly be a significant shift, but there are many potential approaches to sustaining momentum for EV adoption.
Other Federal Programs to Watch
Support for EV purchasers may come in forms other than direct aids after 2025. Possible subsidized benefits could include new EV purchase incentives, the development of charging stations, or continued funding for electric vehicle technology, and renewable energy initiatives.
State and Local Incentives Beyond 2025
Laws to decrease greenhouse gas emissions will likely continue in combustion-engine reliant states. It seems highly likely (even after the federal incentives and support are withdrawn) that states will continue adopting various programs offering tax credits, and rebates, or discounts for the purchase of EVs.
How Manufacturers Might Adjust
To keep consumer interest in EVs, manufacturers might change pricing or increase their own motivational advertising. For instance, EV manufacturers could offer more affordable purchase options for buyers after 2025 through discounts, rebates, or better financing plans.
My Opinion| Navigating the Future of EV Tax Incentives
The expiration of tax credits and other incentives for EVs in 2025 will certainly impact the relative cost and adoption rate of electric vehicles. But, it does not signify a complete exit for EVs. If you change your approach immediately, all incentives can be utilized before they are taken away. There might still be new programs and alternatives designed to ensure EVs remain a viable option for people who want to reduce their carbon footprint.