Sales of electric vehicles have been rising steadily over the past few years, in part because of a federal tax credit of up to $7,500 that makes buying such cars and trucks more affordable.
But understanding which cars it applies to and under what circumstances can be confusing. And all of those rules could change drastically under the incoming Trump administration; President-elect Donald J. Trump and Republicans have promised to repeal or scale back the incentives.
The tax credit was designed to bring the cost of buying or leasing electric vehicles closer to the cost of comparable gasoline models, helping to address climate change. The rules governing the credit are also meant to push automakers to produce those vehicles and their batteries in the United States and reduce the industry’s reliance on China for critical components.
The policy has had an effect. Several automakers have increased domestic manufacturing, and sales are up 7.3 percent from 2023 — to 1.3 million vehicles, according to Cox Automotive, a research firm.
Here is what to know about how the credits work, and how they might change.
Which cars qualify for a tax credit?
At least 15 vehicles from the 2025 model year qualify for the full $7,500 credit. The list is here.
Purchased or leased electric vehicles that meet certain requirements, including where the vehicles are assembled and where crucial materials for their batteries come from, are eligible for the tax credit. The incentive was part of the Inflation Reduction Act signed into law by President Biden in 2022.
To qualify, vans, trucks and sport utility vehicles must have a list price of $80,000 or less; sedans can cost up to $55,000. The credit can be used for fully electric or plug-in hybrid models. To qualify for the credit, individual buyers must earn $150,000 or less and couples $300,000 or less.
The vehicles have to be assembled in North America, and a certain percentage of the value of critical minerals used in the batteries must be extracted or processed in the United States or one of its trade allies.
A separate tax credit for used electric cars is worth up to $4,000. It is open to all models as long as they sell for $25,000 or less. Each vehicle can qualify for the credit only once.
Why did the list of eligible cars change this year?
In 2024, 50 percent of the value of critical materials in E.V. batteries had to be sourced or processed in either the United States or a trading partner country. That number increased to 60 percent this year. That change caused some models to lose their eligibility for tax credits.
Those cars include the Volkswagen ID.4, Rivian R1S, plug-in Jeeps and the Nissan Leaf.
The list can change during the year if automakers certify to the government that their cars now meet the requirements of the law.
Some manufacturers are racing to adjust to the more stringent requirements. Ford’s Mustang Mach E does not currently qualify for the tax credit; the car’s battery packs come from Poland. But later this year, Ford is aiming to begin buying them from a plant in Holland, Mich.
What about leased cars?
The rules for buying and leasing are different. Because the government considers leased cars commercial vehicles, they are not subject to the same requirements.
But the tax credit goes to the leasing company, which is typically the finance arm of an automaker, and while many of those firms have been passing the savings on to consumers, some may not do that.
The rules involving leasing have encouraged automakers to offer some attractive deals. In many states, for example, Volkswagen is advertising leases on the ID.4 for as little as $149 a month with $999 due at signing. A Ford dealer in Brighton, Mich., recently advertised a Mustang Mach E lease for $126 a month with a $3,500 down payment. Those prices typically don’t include taxes and title and licensing fees.
“I wouldn’t advise anyone to rush out and buy an E.V. just to get the tax credit,” said Chris Harto, a transportation policy analyst at Consumer Reports. “But if you are considering an electric car, and you’ve done your research and found a car you want, some of the best options available right now are leases.”
Hasn’t Trump promised to repeal the tax credit?
The tax credits are likely to change — and possibly significantly. During and since the campaign, Mr. Trump and other Republican leaders frequently criticized the electric vehicle tax credits and vowed to eliminate them.
But it is not clear how far Mr. Trump and Congress will go. For one thing, the Republicans have a very small majority in the House, which could make it hard for the party to pass legislation of any kind.
Another wild card is Elon Musk, the chief executive of Tesla, which accounts for nearly half of all electric cars sold in the country. Mr. Musk is close to the incoming president, and it is hard to know how he will seek to shape changes to the tax credit. Four Tesla models qualify for the credit now.
Other auto executives have also been lobbying Mr. Trump against a repeal of the credit. Among them is Ford’s executive chairman, William C. Ford Jr., who recently spoke to the president-elect.
“Obviously, we’d like to keep the tax credit,” Mr. Ford told reporters at a company event last week. “I talked to the president-elect last week, and he’s very aware of how we feel. We’re not going to win absolutely everything. But he clearly understands the importance of the industry. I suspect we’re going to have a very good relationship with him.”
So is this a good time to get an electric car?
Current lease deals are attractive and can be a good option for drivers who want to try electric cars without committing to owning one. Given the rapid advances in battery technology, most analysts expect that in two or three years — the term of most leases — new electric models will cost less and travel farther than they do now.
If you’d rather buy, the $7,500 tax credit makes qualified cars more affordable. Many automakers, including companies that do not make models eligible for the credit, are offering discounts and other incentives on their own.
Ford is offering a free home charger, including the cost of installation, to customers who buy one of its electric vehicles. The Toyota bZ4X does not qualify for the tax credit, but the automaker is offering 0 percent financing on 72-month loans — a significant savings when the average interest rate on car loans is more than 6 percent for most borrowers. Volkswagen is also offering no-interest loans on the ID.4.
And buying or leasing an electric vehicle could become more expensive later in the year if Mr. Trump and Republicans in Congress repeal, reduce or place new restrictions on the tax credit.
“For the middle-class buyer, you take away that credit, and all of a sudden an E.V. is 15 or 20 percent more expensive,” said Steve Wybo, a Detroit-based senior managing director at Riveron, a consulting firm.
