Congressional bill targets EV tax credit, threatening major price hikes by 2026

A new Republican-led proposal in Congress could eliminate key electric vehicle tax incentives by the end of 2026, potentially raising EV prices by thousands of dollars and reshaping U.S. adoption of battery-powered cars. 

The legislation, introduced Monday by the House Ways and Means Committee, seeks to roll back three major tax credits that have helped power EV sales under Former President Joe Biden’s Inflation Reduction Act. If passed, the changes would significantly limit the affordability of EVs for both individuals and businesses.

1. The proposal would phase out the $7,500 consumer tax credit for new EV purchases, limiting eligibility starting in January to automakers that have sold fewer than 200,000 EVs. That threshold would exclude market leaders such as Tesla, Ford, and General Motors, while reducing options for consumers seeking vehicles that qualify for the credit.
2. A $4,000 tax credit for used EV purchases would be eliminated entirely at the end of the year.
3. The most consequential cut for the auto industry would be the termination of the $7,500 commercial vehicle credit, also slated to end this year.

Sign up for CBT News’ daily newsletter and get the latest industry stories delivered straight to your inbox.

According to Edmunds, automakers have widely used this provision to reduce lease prices for EVs, with leasing accounting for up to 80% of monthly EV transactions. Removing the credit could sharply increase monthly lease costs for consumers.

The bill marks a direct challenge to the Biden administration’s clean energy agenda. The Inflation Reduction Act had expanded EV tax benefits in an effort to accelerate the transition to electric vehicles. Now, Republicans—echoing criticism from President Trump, who has called the credits a “corporate giveaway”—are aiming to unwind those incentives.

The proposed 200,000-unit cap would further narrow the field of qualifying vehicles, particularly affecting brands like Rivian and Kia, which are nearing the sales limit.

With the EV market already cooling—sales dropped 5% in April—analysts warn that ending these credits could further dampen consumer demand. Industry groups representing automakers declined to comment on the legislation.