A leasing loophole lets you skirt EV tax credit requirements.
for the full $7500 tax credit provided to buyers by the IRA for their purchase of an EV. That is the result of specific criteria laid out for automakers in the law, which include regulations regarding where a vehicle is built. In order to receive the full credit, an EV or PHEV must be built in the United States, or by our partners in Canada or Mexico. A vehicle must also contain an increasing percentage of battery materials sourced from the U.S. or an approved trade partner.
With the average EV already a more expensive item than a traditional gasoline-powered car, these limits on tax credits have significantly limited the purchasing power many buyers have. That said, similar limitations on material sourcing and construction are not placed on vehicles that are leased. That’s because the IRA views leases as commercial business endeavors, which are exempt from law completely.
The core ideas behind the Inflation Reduction Act’s EV tax credits make a lot of sense. We’re trying to reduce our fossil fuel usage while creating jobs and reducing our dependence on adversarial nations like China and Russia. That said, the timeline related to the rollout of the restrictions has left EV customers with very few options for the time being. Automakers need time to bring new facilities online across the United States, but they are coming.
Born and raised in Metro Detroit, associate editor Lucas Bell has spent his entire life surrounded by the automotive industry.
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