Pras Subramanian · Senior Reporter
Updated 3 min read
Prospective buyers of EVs from Tesla (TSLA), GM (GM), Ford (F), and others have a little extra time to purchase an EV before the Sept. 30 deadline cancels the EV tax credit.
Wording in the One Big Beautiful Bill Act (OBBB) legislation that killed the $7,500 federal EV tax credit set a hard Sept. 30 deadline for claiming the EV tax credit. Manufacturers believed it meant contract signing and delivery had to occur before that date.
While accelerating some timelines for the expiration of other clean energy tax credits, new guidance put forth by the IRS provides some wiggle room for EV buyers.
The IRS now says the meaning of the word “acquired” under the law doesn’t necessarily mean delivery must take place before the deadline.
“If a taxpayer acquires a vehicle by having a written binding contract in place and a payment made on or before September 30, 2025, then the taxpayer will be entitled to claim the credit when they place the vehicle in service (namely, when they take possession of the vehicle), even if the vehicle is placed in service after September 30, 2025,” the IRS said.
If delivery occurs after the deadline, EV buyers should receive a “time of sale report” from the dealer when they take possession and then submit the report via the Energy Credits Online portal.
Essentially, buyers can sign on the dotted line and pay a deposit to meet the requirements, and manufacturers can backfill these orders without needing to have inventory on hand, which means more EV sales for automakers.
In its latest report, Cox Automotive said July new EV sales surged 26.4% month over month and 19.7% year over year to 130,082 units, lifting market share to 9.1%. Cox said July was the second-highest monthly total on record, with 11 brands posting their best EV sales of the year as buyers gobbled up EVs ahead of tax credit expiration.
Cox found that new EV days of supply fell sharply to 87 days, down 32.3% month over month and 49% year over year. This indicates that a supply crunch would have been a problem for EV buyers and manufacturers as August and September sales heat up.
Read more: Are electric cars more expensive to insure?
“With the IRA tax credit set to expire at the end of September, urgency is likely to remain high, positioning the EV market for continued strength through the remainder of Q3,” Cox director of insights Stephanie Valdez Streaty wrote in the report.
Indeed, once the tax credit is gone and delivery is completed, EV sales will likely take a steep dive in Q4.
To soften the blow, automakers from Tesla to GM are racing to sell EVs before the $7,500 federal tax credit ends.
Late last year, in a report dubbed “The Effects of ‘Buy American’: Electric Vehicles and the Inflation Reduction Act,” researchers Joseph Shapiro, Hunt Allcott, and Felix Tintelnot quantified the tax credit’s effect.
After constructing a model and running a simulation, the report found that EV sales in the US would drop 27% if the federal EV tax credit were removed compared to a scenario with the EV tax credit in place. The report found this would lead to EV registrations falling to 867,000 EVs from 1.184 million with the tax credit in place — or 317,000 fewer EVs.
Losing the EV tax credit is a “substantial change,” Shapiro told Yahoo Finance at the time. “It’s a rapidly growing market and relatively new technology, but [loss of the EV tax credit] is not trivial. I mean, $7,500 is not trivial,” Shapiro added.
Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow him on X and on Instagram.
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