Exactly one year ago, on Sept. 30, 2025, Congress ended the federal clean vehicle tax credits for vehicles acquired after that date through the One Big Beautiful Bill Act. The IRS confirmed plainly that any electric vehicle acquired after the cutoff simply does not qualify [3][4]. A year later, the aftershocks have reshaped how Americans buy cars — with hybrids surging, EVs leaning on dealer discounts, states stepping in, and a new federal tax break softening the math for loan borrowers.
EV sales fell. Hybrid sales climbed.
New EV sales dropped 28% year over year in the first quarter of 2026, falling to just 212,600 units, according to Cox Automotive data reported by Jalopnik. Market share dropped to 5.8% [4]. Electric vehicle registrations dropped 31% in July, according to sales data from Motor1.com reported by USA Today — and the outlet identifies the missing federal credit, which once cut up to $7,500 off an eligible EV's cost, as one of the main reasons [1].
An uptick in 2025 EV sales was largely driven by drivers buying while the credit was still available, pulling demand forward, USA Today noted [1]. With the incentive gone, most EVs now cost more than their gas and hybrid counterparts, and many drivers find EV charging inconvenient compared with gas or hybrid refueling, the outlet reported [1].
Hybrids are the clearest beneficiary. Hybrid sales are climbing in 2026 because models like the Toyota Camry and Honda Civic Hybrid are affordable and efficient — and higher gas prices make that efficiency valuable. "Toyota and other hybrid-focused rivals keep adding inventory that many dealers say they could sell twice over," according to Motor1.com, cited by USA Today. Hybrid powertrains also bring more standard features and extra horsepower to many nameplates [1]. Budget options abound: the 2026 Toyota Corolla Hybrid starts at $24,975 and achieves 50 miles per gallon combined, while the Hyundai Elantra Hybrid starts at $25,650 and earns 54 mpg combined [1].
Automakers are discounting to fill the $7,500 hole
With the federal credit gone, manufacturers are deploying their own money. Kia is offering a nationwide $10,000 customer cash discount on the 2026 EV9 — and some dealers are going much further. Shottenkirk Kia of Fort Bend was offering $16,041 off the EV9 Light Short Range, first spotted by CarBuzz, and Liberty Auto Plaza in Illinois was offering $15,000 off, Electrek reported in September [2].
Strikingly, the EV9 has sold better without the credit than with it: through the first eight months of 2026, Kia sold nearly 10,500 EV9s in the U.S., up 12% from the same period last year when the tax credit was still available — though that remains a fraction of the over 98,000 Tellurides sold in the same period [2]. The 2026 EV9 starts at $54,900; the Short Range version offers 230 miles of range and the Long Range up to 305 miles [2]. Sales of other popular EVs, like the Ford Mustang Mach-E and Chevy Equinox EV, are down this year [2].
States and the tax code pick up pieces of the old credit
California launched its own replacement: the MyFirstEV program, active since August 2026. It offers $3,500 off a new vehicle and $1,750 off a used one as an instant point-of-sale discount, with no tax filing. Unlike the federal credit, there is no income cap, but it is limited to first-time zero-emission-vehicle buyers, with a $50,000 price cap waived for California-headquartered automakers. It is first-come, first-served until funds run out. Cadillac, Honda, Lexus, Mitsubishi, Subaru, Toyota and Volvo joined the program in September 2026, with Nissan expected to follow, and Tesla's allocation sold out in just four days, the Epic Energy Blog reported [3].
Federal tax law also added a quieter offset: a new above-the-line deduction of up to $10,000 per year in interest paid on qualifying auto loans, available for tax years 2025 through 2028. Because it sits above the line, it works even for borrowers who take the standard deduction. It applies only to new vehicles with final assembly in the United States, and it phases out above $100,000 in modified adjusted gross income for single filers and $200,000 for joint filers, Kiplinger reported [5].
And on the used market, the picture has flipped: used EV prices have fallen to within about $1,300 of equivalent gas cars, Jalopnik reported [4].
What this means for shoppers
The single $7,500 federal incentive has been replaced by a patchwork: dealer cash on specific models, state point-of-sale rebates like California's, loan-interest deductions for qualifying buyers, and a soft used-EV market. Buyers comparing a hybrid with a discounted EV should price the whole package — incentives, financing, fuel, and charging — because the math that worked in 2024 no longer applies. And with automakers still clearing 2026 inventory ahead of 2027 models, this fall remains an unusually discount-heavy window [2].
Terms
- Federal clean vehicle credit: the former federal tax credit of up to $7,500 for eligible new EVs (up to $4,000 for used), ended for vehicles acquired after Sept. 30, 2025.
- Point-of-sale discount: an incentive applied at the time of purchase, like California's MyFirstEV program, instead of a credit claimed later on a tax return.
- Above-the-line deduction: a tax deduction claimed before adjusted gross income is calculated — available whether or not a taxpayer itemizes.
Sources & evidence
- USA Today: Why EV sales are plummeting as hybrids gain popularity corroborated
- Electrek: Kia offers big EV9 discounts with over $15,000 off at some dealers corroborated
- Epic Energy Blog: California's New Electric Vehicle Credit, MyFirstEV vs. the Federal EV Tax Credit: What Changed, and What It Means for Buyers corroborated
- Jalopnik (via Kinja): EV Tax Credit 2026: What Replaced the $7,500 Break corroborated
- Kiplinger: Ask the Editor — Tax Questions on the New Tax Law corroborated
Reported with AI assistance from public sources; reviewed before publication. — Powered by Creytix.
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