The recently passed budget reconciliation legislation, also known as the One Big Beautiful Bill, represents an overhaul and “reset” of electric vehicle policy in the U.S. While it extends general tax relief for individuals and businesses, it also eliminates and phases out certain incentives that had supported EV adoption, infrastructure development and domestic manufacturing. Below is a breakdown of the key tax-related changes and strategic considerations, as we show it's not all bad news for auto-related businesses.

Elimination of the Clean Vehicle Credits (New and Used)

The federal tax credits for new and previously owned clean vehicles (IRC §30D and §25E) will be eliminated for purchases made after Sept. 30, 2025. These credits provided up to $7,500 for new EVs and up to $4,000 for qualifying used ones, significantly closing the cost gap between electric and internal-combustion-engine vehicles. Their elimination marks a pivotal shift in federal policy.

After Q3 2025, buyers lose this key incentive, which is likely to reduce EV demand, especially among price-sensitive consumers. Automakers and dealers should plan for a sharp uptick in sales activity ahead of the deadline, followed by a potential softening in Q4. Customers should be encouraged to finalize their purchases and deliveries prior to the expiration date to secure full credit value.

Termination of the Qualified Commercial Clean Vehicles Credit

The §45W credit for commercial EVs, offering up to $40,000 for qualifying heavy-duty vehicles, will also expire for acquisitions made after Sept. 30, 2025. This provision has been a central part of many fleet electrification strategies, especially in the logistics, municipal and utility sectors. With its removal, businesses will lose a financial offset for transitioning to electric fleets, disrupting total cost of ownership and internal rate of return calculations. Companies with near-term vehicle replacement plans should accelerate procurement cycles to ensure deliveries are completed before the cutoff. Long-term, fleet managers may need to lean more heavily on state and local incentive programs to fill the financial gap.

Our team had been working with a client on electrifying their fleet. Up to this point, the client had acquired four vehicles, amounting to over $160,000. Though the client and many others are losing the dollar-for-dollar credit on the electrified fleet vehicles, they are regaining 100% depreciation on qualified assets. Those like my client may choose to accelerate these purchases, but even with the elimination of the incentive, business owners could utilize 100% bonus depreciation on fleet electrification efforts to offset some of the cost.

Termination of the Alternative Fuel Vehicle Refueling Property Credit

The §30C tax credit for EV charging stations and alternative fuel infrastructure will no longer apply to property placed in service after June 30, 2026. This credit has been vital in expanding access to charging networks, particularly in underserved or rural areas where private investment faces tighter margins. The phaseout raises the bar for infrastructure developers and property owners looking to recover costs on installation. Projects that are currently in planning or construction phases should be fast-tracked to meet the deadline. Additionally, developers should coordinate with utilities and local authorities to identify overlapping programs that can extend financial viability beyond 2026.

Auto Loan Interest Deduction (Temporary)

The new law introduces a temporary deduction for interest paid on auto loans for new personal-use vehicles assembled in the U.S. The deduction is available from 2025 through 2028 and is capped at $10,000 annually. While not specific to EVs, this provision can benefit buyers of U.S.-made electric vehicles, in lieu of the elimination of the clean-vehicle credits. The deduction phases out for taxpayers with modified adjusted gross income (MAGI) above $200,000 (joint) or $150,000 (single). Dealers and lenders should integrate this deduction into post-2025 promotional materials and purchasing strategies.

Advanced Manufacturing Production Credit (§45X) Tightened

The §45X production credit for domestic manufacturing of clean-energy components remains in place but is subject to stricter qualification criteria. Battery modules and subcomponents must now be produced at the same physical facility, and at least 65% of direct material costs must originate from U.S.-sourced or -manufactured materials. Further, any entity with direct or indirect ties to prohibited foreign actors, including certain Chinese firms, may be disqualified. These changes are likely to drive greater vertical integration and re-shoring of supply chains. Companies currently relying on imported materials or overseas partnerships should conduct a compliance audit and consider reorganizing operations to preserve eligibility for the credit.

Effective for taxable years after July 4, the credit will begin to phase out after Dec. 31, 2029, before being completely eliminated after Dec. 31, 2032.

Advanced Manufacturing Investment Credit (§48D) Expanded

The legislation enhances the §48D Advanced Manufacturing Investment Credit, which rises from 25% to 35% for qualified investments placed in service after Dec. 31, 2025. While the credit is primarily geared toward semiconductor manufacturing, EV industry stakeholders, especially battery producers and power electronics manufacturers, may benefit if their facilities meet the definition of an advanced manufacturing facility. With such a substantial capital offset available, manufacturers should reexamine their long-term site planning, expansion budgets and capital investment strategies to determine whether this credit can be incorporated into their financial models.

Final Takeaway

The Act of 2025 marks a decisive turn in U.S. EV policy from aggressive demand stimulation toward industrial realignment and domestic capacity building. While consumers and fleets will lose access to key credits for vehicles and infrastructure, advanced manufacturers may still benefit through targeted investment and production incentives. The next phase of EV growth will reward adaptability, tax planning and speed of execution. Businesses that act now to align their strategies with the evolving landscape will be best positioned to thrive in the post-incentive era of American electrification.

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