IRS Fact Sheet 2025-05: Expiration and Modification of Certain Energy Credits

Once the Reconciliation Bill was signed into law on July 4, 2025, several significant tax changes were enacted for upcoming tax years. Specifically, the OBBB accelerated the termination of several energy credits, including credits for alternative fuel refueling property, previously owned clean vehicles, and new clean vehicles.

Impact – New Clean Vehicle Credit §30D

The new clean vehicle credit previously helped franchise dealers move EV inventory in a market that has not fully embraced electric vehicles. This refundable credit was for a maximum of $7,500 and was available to the customer to claim against their income taxes in the tax year purchased or could be transferred to the dealer. Many dealers used the transfer option, effectively fronting the credit through a vehicle discount and subsequently claiming reimbursement from the IRS. This strategy helped boost EV sales by lowering front-end purchase prices.

However, since this credit expired on September 30, 2025, affordability challenges for EVs persist. This will continue to pressure OEMs to reduce MSRP to keep inventory moving. Some OEMs, including Ford and GM, made pricing adjustments ahead of the credit sunset, but these efforts have not yet produced a meaningful or tangible impact on consumer affordability based on market trends.

Impact – Previously-Owned Vehicle Credit §25E

The previously owned clean vehicle credit also supported EV sales, particularly for budget-conscious buyers. This refundable credit for up to $4,000 could similarly be claimed by the customer or transferred to the dealer at the time of sale. Dealers often applied the credit upfront as a discount and later submitted the credit claim to the IRS.

However, used vehicles are no longer the affordable alternative they once were, with average prices approaching new-vehicle levels. The September 30, 2025, expiration of the previously owned credit further weakens demand in an already slowing used EV market.

Impact – Alternative Fuel Vehicle Refueling Property Credit §30C

The alternative fuel vehicle refueling property credit is a refundable credit for qualifying EV charging property. Businesses may claim 6% or 30% of the cost, depending on eligibility requirements, with a maximum of $100,000 per item for businesses. Individuals can claim 30% of the cost of the property up to $1,000 if it is installed in their primary residence. This credit was originally introduced to expand EV charging infrastructure in specific areas, and in specific census tracts as defined by the IRS.

Although the credit did not expire in 2025, it now only applies to property placed in service before July 1, 2026. With EV infrastructure in many regions already lagging behind demand, the upcoming expiration may further constrain charging availability, which could strain the United States EV market even more. Franchise and independent dealers that are planning on adding a charger on-site should ensure that the work is completed before July 1, 2026, so they can take advantage of the expiring credit.

Summary

Several EV-related tax credits were shortened or terminated under the OBBB. The early terminations of new and used clean vehicle credits reduce EV affordability and will likely increase pressure on OEMs to lower pricing to stay competitive with traditional autos. The alternative fuel vehicle refueling property credit remains in effect but only for charging equipment placed in service before July 1, 2026. Dealers still considering on-site charger installations should ensure that all work is completed before this date to secure the credit. Overall, these phaseouts will likely reduce EV affordability, further slow EV adoption across the United States, and increase dealer reliance on OEM pricing adjustments to support continued sales activity. Please consult a tax professional.

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