Dealerships handle tax credits for leased electric vehicles differently than those for purchased vehicles. Here’s how it generally works:
Overview of EV Lease Tax Credits
- Eligibility: Leased electric vehicles can qualify for a tax credit under the commercial clean vehicle credit (IRC 45W), which has fewer restrictions than the consumer tax credit (IRC 30D) for purchases.
- Recipient of Credit: The tax credit (up to $7,500) goes to the leasing company, not the individual leasing the vehicle.
- Application of Credit: The leasing company can choose to pass some or all of the savings from the tax credit to the customer, typically by reducing the lease payments or adjusting the residual value of the vehicle.
Dealer Practices
- Reduction in Lease Payments: Some dealerships may offer lower monthly lease payments as a way to pass on the savings from the tax credit.
- Adjustment of Residual Value: Another approach is to increase the vehicle’s residual value by the amount of the tax credit. This can affect the purchase price if the lessee decides to buy the vehicle at the end of the lease.
Example: For a vehicle with an MSRP of $43,000, a dealership might adjust the residual value from, say, $33,000 to a lower amount (e.g., $25,000) if the lessee decides to purchase the vehicle after the lease. This effectively reduces the purchase price by the amount of the tax credit.
In summary, dealerships handle tax credits on EV leases by benefiting from the commercial tax credit and then choosing how to share these benefits with customers, often through reduced lease payments or adjusted vehicle values.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-different-dealerships-handle-tax-credits-in-lease-agreements/
