How Do Federal and State Incentives for EVs Work? Updated for 2026

The sizable Federal EV tax credits are gone. What now? Here are a few other places to look for cash back when buying alternative-fuel vehicles.

Tom Murphy | 

Feb 6, 2024 | 3 min read

Ford

Updated on November 12, 2025

Federal tax credits in the United States played a significant role in nurturing the emerging market for modern battery-electric vehicles over the past decade. But not anymore.

For a few years, a shopper purchasing or leasing a new EV could save up to $7,500 through a federal tax credit available as part of the Inflation Reduction Act, but the credit was rescinded as of Sept. 30, 2025.

However, state and local incentive programs may still be available in parts of the U.S.

Look to the States

While federal EV tax credits are no longer available, certain states continue offering a wide range of incentives. Additionally, many utility providers across the U.S. will help offset the purchase of an EV or the cost to install chargers at home or businesses.

Colorado, for instance, offers rebates for income-qualified state residents to replace old, high-emitting vehicles with EVs. The state also provides funding and grants to help companies and fleet operators convert their trucks to EVs. Overall, Colorado is pursuing a mobility model focused on alternative energy and reduced tailpipe emissions.

In New York, a Drive Clean Rebate can range from $500 to $2,000 based on a vehicle manufacturer's suggested retail price or the vehicle's all-electric range. That means plug-in hybrids with at least 40 miles of electric range will be eligible for rebates starting at $500.

Funds are also available through the state government and utility companies to install charging stations in homes, workplaces, schools, and elsewhere.

The National Conference of State Legislatures website can be a good resource for tracking the latest state EV rebate policies.

Utilities Offer Incentives, Too

On the West Coast, the California New Car Dealers Association is a good resource for tracking state and local incentives for vehicles, as well as incentives to install chargers for the home and office.

In California, Pacific Gas & Electric Company offers rebates up to $4,000 for the purchase or lease of a used EV, and shoppers may qualify for $500 when buying charging equipment. Eligible customers can also qualify for rebates on PG&E-approved EV charging equipment.

In San Francisco, income-qualified Bay Area residents can access incentives up to $12,000 to replace an older car with a plug-in hybrid, battery-electric vehicle, or hydrogen fuel-cell EV. Meanwhile, the California Air Resources Board offers $2,000 vouchers for low-income state residents to purchase an electric bike.

Also in the Bay Area, $7,500 state grants are available if a family replaces an older car with one or more electric bicycles.

Some State Incentives Are in Flux

But some state incentives are drying up.

New York, for instance, offered a High-Occupancy Vehicle (HOV) lane exemption for electric vehicles bearing the state's Clean Pass sticker traveling the Long Island Expressway. But that exemption expired Sept. 30, the same day as the federal tax credit. California EV drivers also recently lost their access to HOV lanes.

Automakers Are Offering Deals and Dropping Prices

Despite the discontinuation of federal tax credits, automakers continue offering their own incentives to move their EV inventory. For EV shoppers, it could pay to pay attention to incentives as they come up.

For example, shortly after the expiration of the federal tax credit, Ford dealers were offering an EV public-charging credit and Red Carpet Lease incentives for F-150 Lightning pickups in stock.

Hyundai began offering substantial bonus cash for customers purchasing 2025 Ioniq 5 EVs, while making low-interest-rate financing available. Even better, Hyundai significantly cut the price of 2026 Ioniq 5 EVs — by almost $10,000.

It's worth looking high and low for every possible incentive, and discovering what's available requires research at a time when the EV pricing winds are constantly shifting.

Tom Murphy

Tom Murphy has been a journalist in metro Detroit for 39 years, the last 28 spent covering the auto industry from every angle, reviewing new vehicles, diving into new technology, and building relationships with automotive contacts around the world. During his 25 years at WardsAuto, Tom led the selection process for and expanded the Wards 10 Best competitions from 2009 to 2022. Tom became executive editor at Autoweek.com in January 2022, running the website, learning to appreciate motorsports, and continuing to drive and evaluate new vehicles. He's working as a freelance automotive journalist now and makes time to drive — and wrench extensively on — the 1953 Packard Patrician he bought in 2021. Tom lives in Royal Oak with his wife, has two grown children, runs half-marathons, and has a fish pond.