With the deadline to qualify for the federal government's $7,500 tax credit on new electric vehicles fast approaching, the IRS has issued new guidance that allows buyers extra time under certain circumstances.
Generous federal tax incentives for EVs are set to expire on Sept. 30, 2025. However, the IRS has clarified that a buyer can qualify for the tax credit as long as they have signed a valid purchase contract and made at least one payment by the deadline.
If those conditions are met, the EV buyer can receive the $7,500 tax credit even if the vehicle is delivered after Sept. 30.
"If a taxpayer acquires a vehicle by having a written binding contract in place and a payment made on or before September 30, 2025, the taxpayer shall be entitled to claim the credit when they place the vehicle in service (namely, when they take possession of the vehicle), even if the vehicle is placed in service after September 30, 2025," the IRS guidance stated.
"Taxpayers should receive a time of sale report from the dealer at the time they take possession or within three days of taking possession of the vehicle," the IRS advised.
The more lenient guidance means that the EV tax credit could apply to many more vehicle purchases than it otherwise would have.
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"The added wiggle room" will benefit "shoppers who want to buy a vehicle that's located in another state and needs to be shipped to them, or who would like to order a car that hasn't been manufactured," Andy Philips, vice president of the Tax Institute at H&R Block, told CNBC.
Despite giving EV buyers additional leeway, the IRS did not apply the same leniency to taxpayers looking to take advantage of the residential clean energy tax credit, which can be applied to environmentally friendly upgrades such as home solar panels.
To take advantage of the tax credit, installation must be completed by the Dec. 31, 2025, deadline, even if the project was fully paid for prior to that date, according to EnergySage, a comparison shopping site that helps people find local solar installers with reviews from past customers.
"If installation is completed after December 31, 2025, the expenditure will be treated as made after December 31, 2025 which will prevent the taxpayer from claiming the … credit," the new IRS guidance stated.
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Driving an electric vehicle and installing solar panels on your home are both great ways to reduce planet-heating pollution while saving money on electricity and gas. Plus, pairing solar panels with a home battery system will make your home more resilient in the event of a power outage.
EnergySage offers free tools that make it easy to compare quotes from local installers and to take maximum advantage of tax credits and other incentives.
With the average solar installation taking 12 weeks to complete, you must act quickly to have your installation finished by the Dec. 31 deadline.
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