When considering the tax credits for electric vehicles (EVs), there are significant differences between leasing and purchasing. Here’s a comparison based on current regulations:
Purchasing an Electric Vehicle
Tax Credit Eligibility:
- Qualifications: To qualify for the full $7,500 federal tax credit, the buyer must meet specific income limits and the vehicle must comply with requirements regarding manufacturing and sourcing of battery components in North America.
- Restrictions: The vehicle must be priced under a certain threshold, and the buyer’s income must not exceed the set limits to be eligible for the full credit.
Leasing an Electric Vehicle
Tax Credit Eligibility:
- Lease Tax Credit: The tax credit for leased EVs is treated differently. The leasing company receives the credit as a commercial sale, bypassing individual income and vehicle sourcing requirements.
- “EV Lease Loophole”: Leasing companies can claim the full $7,500 credit even if the vehicle wouldn’t qualify under personal purchase rules. Any savings are typically passed on to the lessee through reduced lease payments, though this is not mandatory.
Key Differences
- Qualification Requirements: Purchasing requires strict compliance with battery sourcing and income limits, while leasing avoids these restrictions by treating the transaction as a commercial sale.
- Benefit Recipient: In purchasing, the buyer receives the tax credit directly. In leasing, the leasing company receives the credit and may pass savings to the lessee.
- Cost Implications: Leasing allows lessees to benefit from tax credits without needing to claim them personally, potentially reducing lease payments. However, there’s no guarantee that dealers will pass on these savings.
In summary, leasing an electric vehicle can provide more flexibility in accessing the federal tax credit, as it bypasses individual eligibility requirements and income limits. However, the actual benefit is contingent on the leasing company passing on the credit savings to the lessee.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-tax-credits-differ-between-leasing-and-purchasing-an-electric-vehicle/
