California’s new EV incentive knocks $3,500 off new models and $1,750 off used ones.
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It’s been nearly a year since the federal EV tax credit was terminated by the current administration. The $7,500 credit for new EVs was a boon for shoppers curious about going all-electric but unwilling to take a huge hit to their pocketbooks for vehicles that had commanded a premium over gasoline models. And although the new EV market has slowed even as MSRPs have approached—or in some cases reached—parity, used EVs represent an even better deal, and sales are on the uptick as fuel prices continue to hammer many American households. Now California is trying to launch a new EV tax credit within its borders through a combination of Senate Bill 111 (SB 111) and SB 168, which were enacted on June 29.
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The first bill, SB 111, is the 2026 Budget Act that funds California state programs for the 2026–2027 fiscal year. Part of that budget includes funding for SB 168 , a bill that, in part, spells out how this new California EV incentive will work among the California Air Resources Board (CARB), dealerships, and automakers, as well as the incentive amounts and the vehicle price limits required to qualify. If you’re looking to buy or lease a new EV, you’ll be eligible for a $3,500 discount, while used EV buyers will get $1,750 off.
The Discount Will Be Immediate
Unlike the federal EV credit, this discount is immediately available to buyers rather than requiring them to wait until tax season. There were ways around that , though, when the federal incentives were active.
Funding for this initiative won’t come entirely from the 2026–2027 state budget. Automakers will cover half of the incentive, and the other half will come from SB 111 funds. OEMs will also be required to disclose that half of the discount is being paid by the state, and they are not allowed to use this as a workaround to offer cheap EVs outside California until “no less than four years after the date of purchase or lease using this incentive.”
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There’s Always a Catch
But there are some catches for buyers as well. The main one is that you need to be a first-time EV buyer and a California resident. If you already own an all-electric vehicle, new or used, you don’t qualify, and you’ll also need to formally declare that the EV you’re buying is your first all-electric vehicle. Although the $3,500 discount applies to both purchased and leased new EVs, the $1,750 discount for used vehicles applies only to purchases.
The next catch is that MSRP cannot exceed $50,000 for a new EV or $25,000 for a used EV. But if you are buying an all-electric vehicle from a manufacturer headquartered in California, that price cap does not apply. That means you can get a Rivian, Lucid, Karma, Honda, Hyundai, Mazda, Genesis, or Kia EV at any price and still get the full discount. What about Tesla? The American EV maker moved its headquarters from California to Texas in 2021; it continues to assemble vehicles in Fremont, however.