There’s a ‘real risk’ Trump could cancel $7,500 electric vehicle tax credit in 2025 — 3 reasons to act now

The $7,500 electric vehicle tax credit implemented by the Biden administration as part of the Inflation Reduction Act (IRA) has been a game-changer for American drivers who want an affordable entry into the clean energy revolution. But with President-elect Donald Trump set to return in 2025, the federal government appears ready to pull the plug on the popular stimulus.

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Speculation is growing that Trump, who has long criticized clean energy subsidies and said tax credits and tax incentives “are generally not a very good thing,” will move to quickly eliminate the credit as part of a broader tax reform plan. The impact could be significant: In August 2024, the White House said more than 250,000 Americans had taken advantage of the IRA’s electric vehicle tax credit since January, saving those recipients a total of nearly $1.5 billion. Almost all of these buyers benefited from the incentive at the point of sale.

So if you’re thinking of joining the EV revolution with federal tax help, you’d better hurry.

Why might an EV loan expire?

Spoken sources New York Times And Reuters The Biden administration plans to eliminate the $7,500 consumer tax credit for electric vehicle purchases, Trump’s transition team said. He has faced harsh criticism from Republicans, and Trump, who has campaigned on broad tax reform, has frequently said he would eliminate Biden’s “EV mandate.” His administration’s performance on environmental policies and clean energy shows that he will not waste any time. Trump has said he plans to prioritize domestic oil production by accelerating drilling approvals as part of his goal to halve energy costs in the first 18 months of his second term.

“There’s no question there’s a real risk of the EV credit expiring in 2025,” said Jamie Wickett, a partner at the law firm Hogan Lovells and an expert on federal tax policy, energy and environmental issues. CNBC. “If you’re a consumer in the electric vehicle market, I would undoubtedly push that to 2024 if possible, whether it’s an outright purchase or lease, to reduce the risk of the credit being lost.”

What does eliminating credit mean?

Losing the $7,500 tax credit would eliminate a key incentive that makes electric vehicles affordable for Americans, especially as prices remain higher compared to traditional gas-powered vehicles. Without this, the adoption of electric vehicles could slow significantly because fewer middle-income consumers can afford the cost.

Automakers also rely heavily on credit to boost sales and meet federal emissions standards. The rollback could disrupt production plans and make it harder for the U.S. to compete with countries like China, which is aggressively expanding the EV market through government incentives and support.

Advocates for ending the U.S. credit say the incentive unfairly subsidizes electric vehicles that they believe will succeed or fail without government help. Eliminating the credit now, as electric vehicles become mainstream, will force companies like Ford and GM to compete as they ramp up EV production.

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“This would be very counterproductive,” U.S. Energy Secretary Jennifer Granholm told reporters at the recent COP29 climate conference. “You eliminate these loans and what do you do? You end up ceding the region to other countries, especially China.”

As for Trump supporter Elon Musk, whose Tesla brand is synonymous with EVs, giving up the tax credit could help solidify the automaker’s lead among EV makers. In July, he tweeted“Remove subsidies. This will only help Tesla. Also remove subsidies from all sectors!”

news week He noted that Tesla is currently the only major U.S. automaker making consistent profits from EV sales, and that the firm has had longer to take advantage of government subsidies than other companies. According to the report, “In 2010, Tesla received a $465 million loan from the Department of Energy to produce electric vehicles and develop a manufacturing facility in Fremont, California. The loan was paid off in 2013. The company also generated nearly $3 billion in loans offered to EV buyers, according to Subsidy Track’s database tracking subsidies from 2000 to today.”

Should you act now?

For potential EV buyers, uncertainty about tax credits is a green light to act now. Here are three reasons why locking your purchase is a smart move:

• Get the money now: The tax credit remains valid, but its future is in jeopardy. You can take advantage of the full $7,500 benefit by purchasing an EV before any regulatory changes take effect. Many automakers also offer additional incentives such as rebates and discounted financing, making this an ideal time to buy.

• Skip the price hike: If the tax benefit disappears, automakers may raise prices to offset lost sales. EV manufacturers rely on credit to make their vehicles more attractive to cost-conscious buyers. Taking action now will allow you to lock in current pricing and avoid paying more later.

• Fuel savings: Even without tax credits, electric vehicles are cheaper to operate and maintain than gas-powered cars. By switching to an EV now, you can start reaping the benefits of lower fuel and maintenance costs that add up over time.

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This article provides information only and should not be construed as advice. It is provided without any warranty.