A New Cost Shock for EV Owners Electric vehicle (EV)
Ownership in the U.S. may soon come with a hefty annual price tag. As part of sweeping legislation recently approved by the House of Representatives, a new federal fee of $250 per year for EV owners is poised to become law — and it’s sparking heated national debate.
The proposal, introduced under the ambitious and controversially named “One Big Beautiful Bill Act“, is part of a broader Republican initiative to shore up the Highway Trust Fund, traditionally funded by gas taxes from internal combustion engine vehicles.
But what does this really mean for everyday taxpayers, car buyers, and current EV owners?
Beyond the $250 annual fee, the bill eliminates key financial incentives for electric vehicle buyers:
- Federal tax credits for new EVs (up to $7,500) would begin phasing out after 2025 — ending completely for most manufacturers by 2026.
- Used EV tax credits (worth up to $4,000) would be eliminated entirely by December 31, 2025.
This rollback mirrors pre-Inflation Reduction Act policies and could significantly reduce EV affordability in coming years.
If the legislation passes the Senate and is signed into law, every electric vehicle owner in America — regardless of when they bought their EV — will be charged a $250 annual fee.
The goal? To recoup federal highway maintenance funds lost as more drivers ditch gasoline. With over 3.5 million registered EVs in the U.S. and nearly 300,000 new sales just in Q1 2025 (per Kelley Blue Book), lawmakers argue EV drivers must “pay their share.”
According to House Transportation Committee Chair Sam Graves, “this is a fairness issue” — asserting that EVs have used public roads without paying into the system.
However, critics point out that the new fee is three to four times what most gas-powered drivers currently contribute in annual federal fuel taxes (roughly $70/year based on the static 18.4 cents/gallon rate from 1993).
Adding fuel to the fire, former President Donald Trump has clashed publicly with Tesla CEO Elon Musk over the bill. Musk labeled the legislation a “disgusting abomination,” warning that it could devastate the EV market.
Trump responded on Truth Social, implying Musk’s outrage is financially motivated — a reference to Tesla’s heavy reliance on the soon-to-be-eliminated tax credits.
The clash sent Tesla stock tumbling 14% on June 5, wiping out $150 billion in market value. This drop followed already troubling sales declines — including a 36% YoY dip in Germany and 15% in China.
Interestingly, the legislation introduces a temporary car loan interest deduction, capped at $10,000, for loans taken between 2025–2028. Key details include:
- Only vehicles assembled in the U.S. are eligible.
- Deduction phases out for individuals earning over $149,000 and joint filers over $249,000.
- It’s unclear whether this applies to used vehicles.
While helpful for some car buyers, the benefit is narrow in scope and temporary — unlikely to offset the broader EV cost increases.
Final Thoughts from IRSProb
At IRSProb.com, we keep a close watch on tax and legislative changes that affect everyday Americans. The “One Big Beautiful Bill Act” could fundamentally alter how EVs are taxed and subsidized. Whether you’re considering buying an electric car or already own one, now is the time to assess the potential financial impact.
Stay tuned for updates as the Senate deliberates — and subscribe to IRSProb for expert insights on taxes, vehicles, and beyond.
