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Here’s How To Get The $7,500 Electric Car Credit On A Vehicle That’s Otherwise Excluded

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As part of the Inflation Reduction Act signed into law last year, Congress extended the one-time $7,500 “clean car” federal tax credit to help spur sales of electric vehicles, but it only did so selectively.

As it stands the credit only applies to EVs that are assembled in the U.S., and further depends upon its battery component and/or critical minerals sourcing, and a vehicle’s sticker price (maximum $80,000 for vans, SUVs and pickups, $55,000 for cars).

That’s restricted the tax credit’s availability to a relative handful of domestically produced models, including those from Cadillac, Chevrolet, Ford, Rivian and Tesla, along with the Nissan Leaf and Volkswagen ID4 (you can find the current list of qualifying EVs and plug-in hybrids here). In addition, further limits are placed on a purchaser’s modified adjusted gross income ($300,000 per household, $150,000 for an individual, or $225,000 for a head of household).

But some automakers whose EVs would not otherwise qualify for the program, including BMW, Genesis, Hyundai, Kia and a few others have found a way to leverage a loophole in the legislation that allows their customers to take advantage of the $7,500 tax credit anyway, and they’re doing it via their leasing programs.

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Part of the bill that selectively restored the tax credits extended them without the aforementioned exceptions to commercial fleets in a move to encourage them to switch from internal combustion to electric powered vehicles.

As with the previous program, a commercial leasing entity (in this case an automaker’s financing division) as the de facto “owner” is allowed to claim the tax credit via the Clean Vehicle Lease Tax Credit Pass-Through program and apply it directly to an EV’s capitalized cost reduction to reduce a lessee’s monthly payments. The company can also pocket the incentive if it chooses.

Not only does leasing a new EV expand the $7,500 credit’s availability, it essentially puts it into a lessee’s pocket up front without having to wait to claim it in the following year when filing his or her income tax return. Since a buyer’s tax credit is used to reduce his or her yearly tax liability, the leasing loophole assures a lessee who may not owe at least that amount to Uncle Sam will receive the entire credit. It also apparently circumvents the MSRP and income restrictions.

This workaround could well help boost EV leasing which, along with the practice in general, has been on the skids in recent months. Leasing accounted for 26.5% of all new EV transactions back in 2021, and was seen as a way to ensure that one would not be stuck with a technologically obsolete ride down the road. Last year only 12.6% were leased, according to Experian.

We scoured EV makers’ current leasing deals and found the following models passing along the full $7,500 credit as capitalized cost reductions to lessees:

  • BMW i4
  • BMW iX
  • Genesis GV70
  • Hyundai Ioniq 5
  • Hyundai Ioniq 6
  • Hyundai Kona Electric
  • Kia EV6
  • Kia Niro EV
  • Mercedes-Benz EQB SUV
  • Mercedes-Benz EQE Sedan
  • Mercedes-Benz EQE SUV
  • Mercedes-Benz EQS Sedan
  • Mercedes-Benz EQS SUV
  • Polestar 2
  • Porsche Taycan
  • Volvo XC40 Recharge
  • Volvo C40 Recharge

The $7,500 pass-throughs on the above models are advertised as being good through the end of June, but terms are always subject to change at any time. We suspect if leveraging the leasing advantage brings customers coming through showroom doors the pass-through should continue, if not be picked up by other automakers moving forward.

The above content was 100% generated by a human contributor.

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Source: Fox Business

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