California may spend $200 million in state funds to offer an “on the hood” electric vehicle tax rebate that would offer instant discounts to EVs in the state that is home to most plug-in models in the nation.
However, the proposed EV rebate plan, which requires approval from the state legislature as part of the state’s 2026–2027 budget, would come with limitations.
Here’s what to know.
Who qualifies for EV rebate plan?
The California Air Resources Board, which regulates air pollution and auto emissions in the nation’s most populous state, said the new incentive program will be available only to first-time EV buyers.
The agency said other limits will include caps on the price of the electric car that will be similar to restrictions that were put in place for federal credit in a 2022 law.
State EV rebates come after federal incentive curtailed
The California EV rebate plan comes a year after Gov. Gavin Newsom pledged shortly after Donald Trump’s 2024 election win that he would step in to offer electric vehicle tax credits to consumers if Trump followed through on campaign promises to end the popular $7,500 federal credit.
Trump’s administration ultimately followed through on that campaign promise by pushing legislation through Congress that ends the federal tax credit on Sept. 30.
Newsom first announced plans for the state’s EV rebates in early January.
How Californians can get the tax credit rebate
California officials say the program will function as an “on‑the‑hood” discount, meaning buyers receive the rebate instantly at the dealership rather than waiting for tax season. Here’s what to expect based on how similar state programs have operated:
What do California EV rebates mean for car shoppers?
California is home to the largest percentage of car buyers who opt for electric cars.
According to the Alliance for Automotive Innovation, which lobbies in Washington for most major automakers, EVs and hybrid cars composed 26.3% of new light-duty vehicle registrations in California in the third quarter of 2025, which is the most recent data the group has made publicly available. Colorado, Washington and Washington, DC were the only other states above 20% market share in the third quarter of 2025.
Carmakers have lamented the loss of the federal incentive for EVs, and several have slashed plans to build future electric models in light of the shift in the federal government’s support for the technology.
How many EV rebates has California previously given out?
Under its previous Clean Vehicle Rebate Project, which ran from 2013 to 2024, California spent $1.49 billion to give out rebates for more than 586,000 electric vehicles. CARB said the previous round of EV tax credits had the following environmental benefits:
What other limits is California placing on its EV rebates?
California plans to replicate limits on EV prices that were included in the prior federal tax credit.
The limits will be as follows:
CARB said participating automakers in its rebate program will be required to match the state’s contribution, which the agency said would effectively double the incentive available for EV buyers.
CARB said its decision to limiting eligibility to first-time EV buyers will help “expand the market by introducing new consumers to (Zero Emission Vehicle) technology.”
“Research shows that once consumers make the switch to ZEVs, they typically don’t go back to dirty gasoline or diesel vehicles,” the agency said.
This article originally appeared on Palm Springs Desert Sun: New EV rebates proposed for Californians. Here’s what to know
Reporting by Keith Laing and Daniella Segura, Palm Springs Desert Sun / Palm Springs Desert Sun
USA TODAY Network via Reuters Connect
