Jul 4, 2025
The House approves a budget bill that includes the termination of EV tax credits on September 30.
On July 3, the U.S. House of Representatives approved a comprehensive budget bill that includes an accelerated termination of tax credits designed to encourage electric vehicle adoption. The bill, pending President Donald Trump’s signature, signifies the end of numerous incentives from the Biden administration and parts of the Inflation Reduction Act. This follows recent actions by the administration to withdraw federal support for electric vehicles, including the cancellation of California’s stringent vehicle emissions standards.
The House voted 218 to 214 to pass the bill, working quickly to meet Trump’s self-imposed July 4 deadline. The legislation ends the $7,500 tax credit for new electric vehicles and the $4,000 credit for used electric vehicles after September 30, countering requests from dealers and automakers for a longer timeline.
According to the National Automobile Dealers Association, dealers currently have around 140,000 electric vehicles in stock. NADA was involved in provisions related to dealers included in the bill, such as a pass-through deduction, estate tax exemption, bonus depreciation, and limitations on interest deductions.
Lucid Motors' interim CEO Marc Winterhoff noted that abolishing the tax credit would pose significant challenges for new market entrants. The Inflation Reduction Act had previously set the credit to expire at the end of 2032. Consumer insights from a J.D. Power survey indicated that most electric vehicle buyers cited tax credits and incentives as crucial motivations for their purchases in 2024 and 2025.
The act also imposes new limitations on the tax credit for battery component manufacturing, including restrictions on affiliations with entities connected to China, removes penalties for not meeting fuel economy standards, and introduces an auto loan interest deduction.
The bill, upon receiving Trump’s approval, will eliminate fines for automakers that fail to meet certain fuel economy benchmarks. Since 1975, automakers have adhered to the corporate average fuel economy standards, which incentivized improvements through financial penalties for non-compliance. Consumer Reports’ Chris Harto stated that the proposed changes would undermine the CAFE program, reducing it to a mere accounting requirement without enforcement mechanisms, thus likely discouraging the use of cost-effective technologies to benefit consumers at the pump.
Additionally, the bill allows a deduction of up to $10,000 in auto loan interest for eligible taxpayers from 2025 to 2028, applicable even to those who take the standard deduction. However, deductions will only apply to vehicles assembled in the U.S., with further restrictions based on income and vehicle type.
The legislation also establishes new criteria for battery component production credits, disqualifying components that involve assistance from prohibited foreign entities. Taxpayers must not be foreign entities of concern and must comply with various stipulations regarding their production processes.
Finally, the bill introduces a phaseout for credits related to critical minerals production, setting an end date of December 31, 2033, for the previously open-ended critical minerals production tax credit under the Inflation Reduction Act.
The House voted 218 to 214 to pass the bill, working quickly to meet Trump’s self-imposed July 4 deadline. The legislation ends the $7,500 tax credit for new electric vehicles and the $4,000 credit for used electric vehicles after September 30, countering requests from dealers and automakers for a longer timeline.
According to the National Automobile Dealers Association, dealers currently have around 140,000 electric vehicles in stock. NADA was involved in provisions related to dealers included in the bill, such as a pass-through deduction, estate tax exemption, bonus depreciation, and limitations on interest deductions.
Lucid Motors' interim CEO Marc Winterhoff noted that abolishing the tax credit would pose significant challenges for new market entrants. The Inflation Reduction Act had previously set the credit to expire at the end of 2032. Consumer insights from a J.D. Power survey indicated that most electric vehicle buyers cited tax credits and incentives as crucial motivations for their purchases in 2024 and 2025.
The act also imposes new limitations on the tax credit for battery component manufacturing, including restrictions on affiliations with entities connected to China, removes penalties for not meeting fuel economy standards, and introduces an auto loan interest deduction.
The bill, upon receiving Trump’s approval, will eliminate fines for automakers that fail to meet certain fuel economy benchmarks. Since 1975, automakers have adhered to the corporate average fuel economy standards, which incentivized improvements through financial penalties for non-compliance. Consumer Reports’ Chris Harto stated that the proposed changes would undermine the CAFE program, reducing it to a mere accounting requirement without enforcement mechanisms, thus likely discouraging the use of cost-effective technologies to benefit consumers at the pump.
Additionally, the bill allows a deduction of up to $10,000 in auto loan interest for eligible taxpayers from 2025 to 2028, applicable even to those who take the standard deduction. However, deductions will only apply to vehicles assembled in the U.S., with further restrictions based on income and vehicle type.
The legislation also establishes new criteria for battery component production credits, disqualifying components that involve assistance from prohibited foreign entities. Taxpayers must not be foreign entities of concern and must comply with various stipulations regarding their production processes.
Finally, the bill introduces a phaseout for credits related to critical minerals production, setting an end date of December 31, 2033, for the previously open-ended critical minerals production tax credit under the Inflation Reduction Act.