Restrictions on EV Types for Lease Tax Credit
- Vehicle Weight: The EV must have a Gross Vehicle Weight Rating (GVWR) of under 14,000 pounds, except for certain commercial clean vehicles qualifying under a different code (IRC 45W).
- Vehicle Condition: The EV must be new and must not be acquired for resale.
- Classification as Commercial Vehicle: Under the Inflation Reduction Act (IRA), leased EVs are classified as “commercial vehicles,” making them eligible for the full federal clean vehicle credit without needing to meet the strict battery manufacturing and mineral sourcing requirements that apply to purchased vehicles.
- Vehicle Use: The vehicle must be used and not simply held as an investment for resale.
Key Differences Between Lease and Purchase EV Credit Eligibility
- When purchasing, the EV and buyer must meet many stringent requirements (North American assembly, battery component sourcing rules, price caps, and income limits on buyers). Few EVs qualify under these restrictions.
- For leasing, these purchase-specific conditions do not apply to the vehicle or the lessee. The leasing company (lessor) claims the tax credit as a commercial clean vehicle credit (IRC 45W), and the lessee benefits only if the dealer passes on the credit savings in the form of lower lease payments or down payment reductions.
- The lessee’s income does not affect eligibility for the lease tax credit since it belongs to the lessor, not the lessee.
Practical Tips
- To know whether the tax credit will actually reduce your lease payments, you must check with the dealer or manufacturer because passing on these savings is at their discretion.
- The vehicle you lease must be new and meet the weight and usage requirements, but beyond that, the usual restrictions on battery sourcing and vehicle pricing that apply to purchases are waived for leases.
Summary
Yes, there are some restrictions on the types of EVs that qualify for the lease tax credit, mainly that the EV must be new, weigh under 14,000 pounds (unless commercial), and be used rather than held for resale. However, the lease tax credit benefits from much looser restrictions regarding battery sourcing, vehicle price, and buyer income limits compared to the purchase credit. This classification of leased EVs as commercial vehicles allows a broader range of EV models to qualify for the full federal tax credit, which the lessor claims and may pass on as savings to the lessee.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/are-there-any-restrictions-on-the-types-of-evs-that-qualify-for-the-lease-tax-credit/
