According to media reports, on July 3, the U.S. House of Representatives passed a sweeping appropriations bill that includes provisions to accelerate the termination of tax credit policies aimed at promoting the adoption of electric vehicles (EVs).
The bill is currently awaiting President Donald Trump's signature, marking the impending end of several incentives and hallmark legislative achievements from former President Joe Biden's administration, including key provisions of the Inflation Reduction Act. Prior to this, the Trump administration had already moved to roll back federal EV support, including the termination of California's stringent vehicle emissions standards.
The House passed the bill by a narrow vote of 218 to 214. Lawmakers rushed to meet the self-imposed July 4 deadline set by Trump, pushing the legislation through just in time.
The bill stipulates that, starting September 30, the $7,500 federal tax credit for new EVs and the $4,000 credit for used EVs will be discontinued. This decision ignored requests from car dealers and automakers to delay implementation and reversed an earlier House plan that included a longer transition period.
The National Automobile Dealers Association (NADA) told Automotive News on June 27 that approximately 140,000 EVs remain unsold in dealer inventories. After the bill's passage on July 3, NADA stated that it had played an integral role in shaping several key provisions related to dealerships, including passthrough deductions, estate tax exemptions, special depreciation rules, and interest deduction caps.
Marc Winterhoff, interim CEO of Lucid Motors, told Automotive News that the end of EV tax credits would make survival significantly harder for emerging automakers. Notably, the original Inflation Reduction Act had scheduled the tax credits to phase out by the end of 2032.
A survey by J.D. Power revealed that EV tax credits and other incentives were cited by most buyers as key motivations for purchasing EVs in 2024–2025.
Separately, on July 1, EV advocacy group the Electrification Coalition urged the House to reconsider the Senate-passed legislation. The group warned that eliminating EV tax incentives "at this critical juncture will directly damage investment enthusiasm in U.S. manufacturing" and called the move "a surrender that hands leadership of the future of mobility to China." The coalition declared, "The House must reject this legislation that betrays the interests of the American people."
Beyond EV tax credits, the bill introduces additional changes, including:
Restrictions on tax credits for battery component manufacturing involving Chinese-linked entities;
Elimination of penalties for failing to meet fuel economy standards;
A new tax deduction for auto loan interest.
With Trump's expected signature, automakers that fail to meet certain fuel economy targets will no longer face fines. Since 1975, automakers have complied with the Corporate Average Fuel Economy (CAFE) standards, which penalize manufacturers for failing to improve fuel efficiency.
Chris Harto, Senior Policy Analyst at Consumer Reports, criticized the proposed changes when the Senate text was first released, saying they would "destroy the popular and effective CAFE standards, turning them into a meaningless accounting exercise."
Harto added: "Without enforcement, many automakers will simply continue to sideline proven, cost-effective technologies instead of deploying them to reduce fuel expenses for consumers."
The new legislation also introduces a deduction of up to $10,000 annually for auto loan interest from 2025 through 2028. This will be available as an "above-the-line" deduction, meaning it applies to both itemizers and standard deduction filers.
Only vehicles assembled in the U.S. qualify for the tax deduction, and commercial vehicles are excluded. Additional restrictions include income caps for vehicle buyers.
The bill also imposes new eligibility criteria for tax credits on battery components. It prohibits tax benefits for components that include materials sourced from sanctioned foreign entities or those "controlled by foreign adversaries." The U.S. government will issue further guidelines, and specific definitions for such entities will be finalized within the first tax year following the bill's enactment.
A new domestic content requirement for battery subcomponents is also included: to qualify for credits, at least 65% of the direct material cost must originate from components mined, produced, or manufactured within the U.S.
Lastly, the bill introduces a sunset clause for tax credits related to critical mineral production, setting the expiration date for December 31, 2033-a limit that the original Inflation Reduction Act did not include.
