NADA Update on H.R. 1, the “One Big Beautiful Bill Act” and EV Credits

NADA worked with the tax-writing committees and congressional leadership for many months to ensure the inclusion of key dealer-related provisions in the final bill - provisions that notably will provide permanent tax relief:

• Pass Through Deduction (Section 199A): Makes permanent at 20%. Also expands the deduction limit phase-in range by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts to $75,000 and $150,000, respectively. Effective for taxable years beginning after Dec. 31, 2025.
• Estate Tax: Makes permanent and increases the exemption to $15 million (individual)/ $30 million (joint), and adjusted for inflation annually thereafter. Effective for estates of decedents after Dec. 31, 2025, and gifts made after Dec. 31, 2025.
• Interest Deduction Limitations (Section 163(j)): Reverts to EBITDA permanently for taxable years ‘‘beginning after Dec. 31, 2024."
• Bonus Depreciation (Section 168(k)): Permanently restores and extends 100% bonus depreciation for property acquired and placed in service on or after Jan. 19, 2025.

Relevant EV Provisions:

• New EV Credit (Section 30D): For consumers who purchase certain new EVs: eliminated after Sept. 30, 2025. (The law does not include the exemption for manufacturers who sold less than 200,000 EVs which was included in a previous version of the bill.)
• Leasing and Commercial EV Credit (Section 45W): A tax credit for leasing and qualified commercial clean vehicles. Eliminated after Sept. 30, 2025.
• Used EV Credit (Section 25E): A tax credit for previously owned clean vehicles. Eliminated after Sept. 30, 2025.

  • ⚠️ Please Note: Dealers should inform their customers of the upcoming changes and encourage them to accelerate their EV purchase or lease plans before the tax credits expire. GOP congressional leaders had sought a repeal of all the EV tax credits 30 days after the enactment of the bill, but the final bill addresses NADA’s request for a longer phase-out period. 

Additional Provisions:

• Temporary Auto Loan Deductibility: Above the line deduction on auto loan interest for new vehicles. $10,000 cap and MAGI limits of $100,000 (individual)/$200,000 (joint). Vehicle must be final assembled in U.S. Deduction available from 2025- 2028.
• Income Tax Rates: Permanently extends modified income tax rates. The provision also adds an additional year of inflation adjustment to the income tax thresholds to which the 10%, 12%, and 22% brackets apply. Effective for taxable years beginning after Dec. 31, 2025.
• SALT – Business/PTET: The 2017 Tax Cuts and Jobs Act created a $10,000 cap on the amount of state and local taxes (SALT) that could be deducted from a taxpayer’s federal taxable income. Some states created a workaround for the SALT cap by allowing pass-through businesses to deduct certain state and local taxes at the entity level, known as the pass-through entity tax (PTET). While prior versions of H.R. 1 would have limited the SALT workarounds, NADA successfully fought to preserve PTET.
• SALT – Individual Cap: Increases SALT cap deduction to $40,000, for 2025, with 1% annual increases through 2029. Reverts to $10,000 in 2030. Deduction phases down with income over $500,000.
• Expense Deduction (Section 179(b)): Permanently increases to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million. Effective for property placed in service for taxable years beginning after Dec. 31, 2024.
• Clean Heavy-Duty Vehicles (IRA Section 60101): The Inflation Reduction Act established a program to grant awards for purchasing heavy-duty electric vehicles. The bill repeals the program and rescinds any unobligated balance. Effective on the date of enactment.
• CAFE Rule: Reduces NHTSA’s Corporate Average Fuel Economy (CAFE) penalty for automakers not meeting the standards to $0, effective on the date of enactment.

 Key provisions not included in the bill:

• While the House-passed bill and initial Senate bill included a repeal of the Environmental Protection Agency’s EV mandate, the Senate parliamentarian ruled that this provision was not budgetary in nature and could not be included in H.R. 1.
• The Senate bill does not include new fees for EV or hybrid registrations, an issue that will be considered during the upcoming highway reauthorization bill.

NADA will host a tax webinar with expert dealer CPAs to review H.R. 1’s major provisions on Thursday, July 24 at 1 p.m. ET, and will update members on significant developments affecting dealers.  NADA will also engage the IRS on implementation guidance it may issue related to these provisions.

Go deeper:

• Read NADA’s tax priorities here.