When leasing an electric vehicle (EV), the eligibility requirements for federal EV tax credits differ significantly from those when purchasing an EV.
Key Points About EV Tax Credits When Leasing
- Tax Credit Recipient: The federal EV tax credit associated with a leased vehicle does not go to the lessee (you), but instead to the lessor (the leasing company or dealer). This means the tax credit is claimed by the entity that owns the vehicle (usually the dealer or leasing company), not the person who leases it.
- Credit Amount: The lessor can claim up to the full $7,500 federal tax credit available for new EVs. This tax credit is separate from the consumer tax credit for purchases and generally has fewer restrictions.
- Fewer Restrictions: Unlike direct purchases where the vehicle must meet strict conditions—such as being made in North America, meeting battery sourcing requirements, price caps, and income limits for the buyer—these restrictions do not apply for the leasing company’s tax credit. Leasing companies qualify for the full credit regardless of these factors.
- Benefit to Lessee: Since the leasing company receives the tax credit, they may pass all or part of the savings on to the lessee in the form of reduced lease payments or rebates. However, passing on these savings is at the discretion of the dealer or leasing company, so not all lessees benefit equally.
- No Income Limits for Lessees: Because the lessee is not claiming the tax credit, their income does not affect eligibility, unlike with direct purchases where income limits can restrict eligibility to claim the credit.
Summary of Eligibility Requirements for Lessees
- The lessee does not directly claim the federal EV tax credit.
- The leased EV is considered a commercial sale to the lessor, which qualifies for a separate, less restrictive tax credit.
- There are no income or strict vehicle manufacturing/battery requirements imposed on the lessee.
- Any savings from the tax credit must be passed on by the lessor via lower lease payments or incentives.
This arrangement is often called the “EV lease tax credit loophole” because it allows a wider selection of EVs to be leased with potential savings from the full tax credit, bypassing many of the usual consumer eligibility rules tied to purchasing EVs.
In conclusion, while you do not personally get the federal tax credit when leasing an EV, the leasing company does, and this can translate into reduced lease costs for you. The main eligibility “requirement” for lessees is simply to lease the vehicle, while the detailed tax credit qualifications apply primarily to the lessor.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-eligibility-requirements-for-ev-tax-credits-when-leasing/
