Electric vehicles (EVs) continue to capture headlines not just for their environmental benefits, but also for the financial incentives available to buyers and businesses. The federal government is offering generous tax credits of up to $7,500 for new EVs and $4,000 for qualifying used EVs. But here’s the critical detail: Under current IRS guidance, to access these credits, your vehicle must be “acquired” no later than September 30, 2025.
That requirement makes timing everything. And as anyone who has tried to interpret IRS language knows, the devil is in the definitions. What does “acquired” really mean? How do the rules differ for purchases versus leases? And what steps should you take right now if you’re planning to buy or lease? Let’s break it down.
Why This Deadline Matters
According to the IRS, the concept of being “acquired” is what determines whether you meet the cutoff. Unlike placing an online “pre‑order” or paying a refundable deposit, an acquisition only occurs when two things happen:
- You enter into a binding written contract to purchase the vehicle, and
- You make a payment (which can include a down payment or even a trade‑in).
Delivery of the vehicle, known as being “placed in service” may happen later, but the date of acquisition locks in your eligibility. For taxpayers who want certainty on their entitlement to credits, this distinction is key.
The Three Main EV Credits: What They Offer and Who Qualifies
1. The New Clean Vehicle Credit (Section 30D)
- Value: Up to $7,500.
- How it’s determined: Split between compliance with two sourcing rules:
- $3,750 for meeting critical minerals sourcing requirements.
- $3,750 for meeting battery components sourcing requirements.
- Vehicle rules:
- Final assembly in North America.
- MSRP cap: $80,000 for SUVs, vans, and pickups; $55,000 for cars.
- Must be new, not previously titled.
- Buyer rules:
- Adjusted Gross Income (AGI) caps: $300,000 (married filing jointly), $225,000 (head of household), $150,000 (single).
- Timing tip: You claim the credit for the year you receive your vehicle (placed in service). Beginning in 2024, you can transfer the credit at the point of sale to a dealer, reducing your upfront price.
2. The Previously Owned Clean Vehicle Credit (Section 25E)
- Value: Up to $4,000, but capped at 30% of the sale price.
- Vehicle rules:
- Sale price cannot exceed $25,000.
- Vehicle model year must be at least two years older than the calendar year of purchase.
- Must be bought from a licensed dealer.
- Battery capacity of at least 7 kWh; weight under 14,000 pounds.
- Buyer rules:
- Income limits: $150,000 (MFJ), $112,500 (Head of Household), $75,000 (Singles).
- Buyer cannot be a dependent.
- Buyer cannot claim the 25E credit more than once in a three‑year period.
3. The Commercial Clean Vehicle Credit (Section 45W)
- Value: Up to $7,500 for lightweight EVs (<14,000 lbs) and up to $40,000 for heavier EVs.
- Who claims it: Businesses and tax‑exempt organizations. In consumer leases, the dealership or leasing company (the “lessor”) claims this credit. They may pass the savings through to the customer.
- Unique feature: This credit doesn’t impose consumer income or MSRP limits, making it much broader in scope.
“Acquired” vs. “Placed in Service”: A Vital Distinction
The IRS is very particular about wording, and for good reason. Here’s what to remember:
- Acquired = the date your binding contract is signed and payment is made.
- Placed in Service = the date you actually take delivery and use the vehicle.
This means you can “lock in” your eligibility if you sign a binding contract with payment on or before September 30, 2025 even if your EV is delivered a few weeks later.
Example scenario:
- Maria enters a binding purchase contract for a qualifying EV on September 28, 2025 and trades in her old car as part of the payment. Even if her EV arrives in October, Maria acquired the vehicle before the cutoff and remains eligible.
Common Misunderstandings (and How to Avoid Them)
- “Every EV qualifies for $7,500.”
Not true. Many vehicles only qualify for partial credits or none at all depending on sourcing, MSRP, and income thresholds. - “Leasing means I get the 30D credit.”
Not exactly. For leases, the dealer/finance arm applies for the commercial credit (45W). You may benefit if they pass that savings into your monthly payment, but you don’t file for 30D yourself. - “A $100 refundable deposit is enough.”
Nope. The IRS requires a binding written contract and a payment. A fully refundable “reservation” fee doesn’t count as binding; think of it more like “dibs” than a contract.
Steps to Take Before September 30, 2025
1. Check your eligibility
- Compare your income to the AGI thresholds.
- Verify your vehicle qualifies, don’t rely solely on the salesperson’s assurance. Use IRS and Department of Energy lists for confirmation.
2. Secure documentation
- Ensure your sales contract is binding, with appropriate legal language.
- Retain proof of your payment or trade‑in.
3. Coordinate with your dealer
- If transferring the credit at the point of sale (starting in 2024), confirm the dealer is IRS‑registered and provides the required time‑of‑sale report.
4. Ask about leases
- If leasing, ask specifically how the 45W benefit is factored into your monthly payment. A reputable dealer should show the math.
Frequently Asked Questions
Q: Can I claim the credit for a vehicle ordered before the deadline if it arrives after September 30, 2025?
Yes. If you signed a binding written contract with payment before the cutoff. Delivery date is less important than acquisition date for deadline purposes.
Q: Do leased vehicles qualify for the new or used credit?
No. Leased vehicles fall under Section 45W, where the leasing company claims the credit. They may pass along the benefit to you, but that’s discretionary.
Q: I made a deposit months ago but haven’t signed a contract. Does that count?
No. A refundable deposit without a binding agreement doesn’t lock in the acquisition date.
Practical Scenario
The Savvy Buyer:
Alex wants a new SUV with an MSRP of $75,000. His income is $200,000 and he files jointly.
- Income falls under the $300,000 MFJ limit.
- MSRP is under $80,000 for SUVs.
- He signs a contract and trades in his old vehicle in August 2025.
Result: Although the car won’t be delivered until October 2025, Alex qualifies for the $7,500 credit because the acquisition date was locked in before September 30.
Conclusion
For taxpayers considering an electric vehicle, the September 30, 2025 acquisition deadline is critical. To receive up to $7,500 for new vehicles or $4,000 for used ones, you must act decisively and document carefully: sign a legally binding purchase agreement, make a payment, and keep every scrap of paperwork.
Missing a credit can be painful. Being proactive ensures those federal incentives drive home with you—literally.
Need help navigating complex IRS rules or running the numbers on your situation? Contact the professionals at Local Outsourced Accounting for personalized assistance.
