The income limits for EV tax credits differ between purchases and leases due to how these transactions are classified and who receives the tax credit.
Purchase Tax Credits
- Eligibility Requirements: When purchasing an electric vehicle, both the vehicle and the buyer must meet specific requirements. The vehicle must be priced below a certain threshold, manufactured in North America, and its battery components must meet strict sourcing requirements. Additionally, the buyer’s income must be below certain levels: $300,000 for married couples filing jointly or a surviving spouse, $225,000 for heads of households, and $150,000 for all other filers.
- Tax Credit: The buyer can claim a tax credit of up to $7,500 if they meet these conditions.
Lease Tax Credits
- Eligibility Requirements: Leasing an electric vehicle is considered a commercial transaction, which means the lease company (the lessor) receives the tax credit, not the individual leasing the vehicle (the lessee). As a result, income limits do not apply to the lessee since they are not claiming the tax credit.
- Tax Credit: The leasing company can claim the full $7,500 tax credit for eligible vehicles without meeting the vehicle sourcing or buyer income requirements. The lessee may benefit from lower lease payments if the leasing company chooses to pass on the savings.
In summary, income limits apply to purchases because the buyer claims the tax credit directly and must meet specific financial criteria. In contrast, leases are treated as commercial transactions, where the leasing company claims the tax credit, bypassing individual income limits and allowing more flexibility in terms of vehicle eligibility and lessee income status.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/why-are-income-limits-different-for-purchase-and-lease-tax-credits/
