- The IRS is giving some wiggle room to buyers who don’t take delivery of their new EV by the federal tax credit’s expiration date of September 30.
- As long as a buyer signs a binding contract and puts down a deposit by September 30, the U.S. government will recognize the sale and allow for the tax credit to be applied.
- Ultimately, this will benefit buyers who already know what they’re buying and just can’t get it in time.
Electric vehicle shoppers are sweating the federal EV tax credit’s fast-approaching expiration date of September 30. Those who have been shopping around for an upgrade or simply don’t want to miss out on the U.S. government’s rebate program have been moving up their buying timelines, sending EV sales soaring.
If you’re one of those shoppers, here’s one reason to breathe a sigh of relief: The IRS is cutting folks a break if they aren’t quite able to take delivery by the deadline.
On Thursday, the IRS clarified how exactly several tax credit schemes terminated by the One Big Beautiful Bill Act will be phased out. The law changed the tax credits for new, used and commercial EVs—30D, 25E and 45W, respectively—to say that they don’t apply for vehicles “acquired” after September 30. Now the IRS has cleared up what that actually means.
The guidance notes that buyers won’t actually need to take delivery of their vehicle by September 30. But they will need to have a binding sales agreement signed by that deadline. And they’ll need to make some kind of payment, which could be a down payment.
The Kia EV9 is one popular tax-credit-eligible EV that will get more expensive after September 30.
Photo by: Patrick George
It’s important to point out that this isn’t some sort of magic fix that will save the EV tax credit, or even one that can guarantee it will be applied to a car that you’ve preordered (sorry, soon-to-be Rivian R2 buyers). But it does mean buyers can squeeze in a last-minute purchase of vehicles caught up in transit or just not able to be driven home by the end of September.
“For purposes of sections 25E, 30D, and 45W, a vehicle is ‘acquired’ as of the date a written binding contract is entered into and a payment has been made. A payment includes a nominal downpayment or a vehicle trade-in,” the IRS said. Assuming a buyer checks those boxes, they can then claim the credit once their vehicle is “placed in service,” the IRS notes, even if that happens after September 30.
That wasn’t clear before. After the OBBBA was signed into law on July 4, Tesla told customers they must “take delivery (not just order)” by September 30 to get the federally funded discount.
NPR sheds a bit of additional light onto the requirements set by the IRS:
The IRS has typically used delivery dates to determine eligibility for the tax credit; for example, if your vehicle would have qualified for a tax credit in 2024 but not in 2025, and you took delivery on January 1, you were out of luck.
But it’s not unprecedented for the agency to base eligibility on the date a contract was signed.
“The IRS has used this exact same language before, when the rules for claiming the credit changed after the Inflation Reduction Act was passed,” notes Sean Tucker, the lead editor of Kelley Blue Book.
Automakers are already dangling discounts and deals to the public to encourage them to buy ahead of the end of the federal EV tax credit. Buyers who scoop a vehicle up now will have the U.S. government subsidizing the cost of the vehicle. After September 30? It’s up to the automaker to eat into its own margin to make the vehicle more affordable.
Most automakers won’t be able to do that to the tune of $7,500 and still make a profit (especially on base trims). In fact, analysts predict that America’s EV demand could drop as much as 27% without the credit in place.
This little bit of extra wiggle room is not a free ride for the industry, or even one that will solve the lull expected in Q4 sales. It’s more of a caffeine shot that will give buyers the chance to qualify for the credit before the FOMO-driven Q3 sugar high comes crashing down.
This will mostly benefit folks who have a vehicle already picked out. If they’re buying a Model 3, for example, this could benefit them if their delivery day gets pushed back by the service center. Or those who want another vehicle that their local dealership still has in transit from the factory, or needs to be sourced from another dealer’s lot. And let’s not forget those who choose to lease an EV.
EV sales have remained pretty static as far as market share goes, hovering in the neighborhood of 8-10% since 2023. This share is still expected to grow in the long run, whether it be because of the natural progression from automakers’ investment in the powerplant, because of dropping costs and greater awareness or (as Rivian CEO RJ Scaringe points out) because EVs are more suited to the needs of software-defined vehicles.
