Vehicle Energy Performance Act of 2025

Key Points

• The bill creates a new tax credit of up to $5,000 for buyers of fuel-efficient cars and light trucks starting with model year 2027. The credit scales based on how much better a vehicle's fuel economy is compared to the median of the prior model year.
• Starting with model year 2029, a fee of up to $5,000 is imposed on manufacturers when they sell vehicles with below-median fuel economy. This fee would likely be passed on to consumers, making gas-guzzling cars more expensive.
• Buyers can transfer their tax credit to the car dealer at the point of sale, getting an immediate discount on the purchase price instead of waiting until tax filing season. The dealer must reduce the price by the full credit amount.
• The bill updates how the government measures fuel economy for plug-in hybrid vehicles, requiring real-world data to show how much drivers actually use electricity versus gasoline. New window sticker labels will display a multi-day average fuel economy figure.
• Both the credit and the fee amounts are adjusted for inflation each year after they take effect. Vehicles must also meet all federal safety and clean air standards to qualify for the credit.