Highlights:

• Federal EV tax credits of up to $7,500 are set to expire on Sept. 30 under new legislation.

• IRS guidance confirms buyers can still qualify if they sign a binding contract and make payment before the deadline.

• Eligibility applies to new, used, and leased vehicles, provided certain requirements are met.

A Tax Credit on the Clock
The clock is ticking for U.S. consumers hoping to take advantage of the federal tax credit for electric vehicles, worth up to $7,500. Under a Republican-backed tax and spending package passed in July, the incentive will no longer be available for EVs acquired after Sept. 30. Initially, the phrasing in the law led many to believe that drivers had to physically take possession of their vehicle before that date. However, recent clarification from the Internal Revenue Service suggests otherwise, offering potential buyers a valuable extension of time.

IRS Clarification Shifts the Timeline
According to new IRS guidance issued on Aug. 21, consumers need not drive off the lot before the deadline. Instead, they can qualify by entering into a written binding contract and making a payment — whether a deposit, down payment, or even a trade-in — on or before Sept. 30. This adjustment provides an important buffer for households navigating long wait times for EV deliveries or supply chain bottlenecks.

The ruling applies broadly, covering purchases, leases, and even used electric vehicles under relevant provisions of the tax code. For many prospective buyers, this means the process of reserving a car before the deadline is sufficient, as long as the contractual and payment requirements are met.

Strategic Timing for Consumers
Consumer advocates see the clarification as a lifeline for those worried about missing the cut-off. “This means that if you can’t drive off in the clean vehicle of your dreams by Sept. 30, there is still hope,” said Ingrid Malmgren, senior policy director at Plug In America. By reducing the pressure to take immediate delivery, the IRS decision may help preserve demand at a time when EV adoption is already under scrutiny due to higher borrowing costs and fluctuating consumer sentiment.

There are also financial planning considerations. Buyers can opt to claim the credit on their annual tax return or as an instant rebate at the point of sale. The latter provides faster access to funds and eliminates the need for a tax liability, potentially broadening access for middle-income households. However, consumers must ensure they receive a time-of-sale report from the dealer within three days of pickup to secure eligibility.

Market and Policy Implications
The phaseout of the EV tax credit reflects a significant policy shift, reshaping incentives that have helped fuel electric vehicle adoption in the U.S. over the past decade. For automakers, the timing could prove challenging, as incentives remain a key driver in persuading cost-conscious buyers to switch from traditional combustion engines to electric alternatives.

Looking forward, policymakers, manufacturers, and consumers alike will need to navigate a changing incentive landscape. While the near-term focus is on meeting the Sept. 30 contract deadline, the longer-term question is how the U.S. EV market will adjust once the credit disappears. Investors and industry leaders will be watching sales data closely in the final quarter of 2025 for signs of whether demand remains resilient without federal support — or if momentum slows as financial incentives fade.