When the Inflation Reduction Act (“IRA”) became law in 2022 it provided the automotive industry with a boost by allowing some consumers to get a tax credit up to $7,500 for purchasing some electric vehicles. There were many qualifications:
- A maximum adjusted gross income, depending on tax filing status
- A maximum MSRP for the vehicle
- Vehicle must have final assembly in North America
- A minimum amount of the critical minerals sourced from the US or free trade partner nations for half the credit ($3,750)
- A minimum amount of battery component sourced from the US or free trade partner nations for the other half of the credit ($3,750)
However, it was recently announced that other electric vehicles that do not meet these requirements, specifically on final assembly and minerals / component content sourcing, could be eligible for up to $7,500 tax credit if leased because of the incentives for clean commercial vehicles. These would need to be a “bona fide” lease, which means there is depreciation and it is for an approved manufacturer (of which all the existing electric vehicles on the roads come from the manufacturers). This removes the income limits and maximum MSRP as well! Thus, there are several additional vehicles that wouldn’t qualify, and/or they may be vehicles targeted towards a more affluent consumer that wouldn’t qualify if purchasing the vehicle.
Now, there are some limits: the consumer isn’t getting the tax credit, it is going to the lessor. But, since the market has become more competitive, almost all manufacturers and their captive finance companies that handle their leases are passing these credits along to the consumer. And again, the dealer sells you the vehicle, but the lessor is very much involved in setting the terms of the lease, so if the dealer doesn’t provide a deal inclusive of the credit, talk to some other dealers that sell the same vehicle too.
So what are the requirements for the clean vehicle credit? Much simpler than for the consumer section. From the IRS website:
To qualify a commercial clean motor vehicle under IRC 45W, you must certify that the vehicle is manufactured primarily for use on public roads and has at least 4 wheels, with an exception for vehicles that operate on rails.
Then, specific to plug-in electric vehicles (either plug-in hybrid or electric only):
Plug-in Electric Motor Vehicles
GVWR under 14,000 pounds:
Certify that it draws significant power from a battery with a capacity of at least 7 kilowatt hours or is a new fuel cell motor vehicle as defined in IRC 30B(b)(3). Also provide the manufacturer’s suggested retail price.
Why provide the manufacturer’s suggested retail price (MSRP)? Because, as is stated in a IRS published fact sheet from December 2022:
Q3. What isthe amount of the qualified commercial clean vehicle credit a taxpayer can claim? (added December 29,
2022)
A3. The amount of the qualified commercial clean vehicle credit is the lesser of (1) 15 percent of the taxpayer’s tax basis in
the vehicle (30 percent in the case of a vehicle not powered by a gasoline or diesel internal combustion engine), or (2) the
incremental cost of the vehicle.
So, in the case that you’re looking to lease, the credit size will be limited below $7,500 on either plug-in hybrid vehicles with a selling price below $50,000 or a full electric vehicle below $25,000.
You must also provide the following information based on vehicle type:
| Vehicle | Starting MSRP | Max Purchase Tax Credit | Max Lease Tax Credit | Notes |
| Audi Q4 e-tron | $49,800 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Audi e-tron GT | $104,900 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Audi Q5 (plug-in hybrid) | $57,400 | – 0 – | $7,500 | Only the plug-in hybrid would be eligible for the leasing credit, if offered by the lessor |
| Audi Q8 e-tron | $74,400 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Cadillac Lyriq | $58,590 | $7,500 | $7,500 | This vehicle is eligible for the tax credit whether purchased or leased. If leased, it is only eligible if the lessor extends the credit to the lessee. |
| Chevrolet Bolt | $26,500 | $7,500 | $7,500 | This vehicle is eligible for the tax credit whether purchased or leased. If leased, it is only eligible if the lessor extends the credit to the lessee. |
| Chevrolet Bolt EUV | $27,800 | $7,500 | $7,500 | This vehicle is eligible for the tax credit whether purchased or leased. If leased, it is only eligible if the lessor extends the credit to the lessee. |
| Chrysler Pacifica Plug-in Hybrid | $50,795 | $7,500 | $7,500 | This vehicle is eligible for the tax credit whether purchased or leased. If leased, it is only eligible if the lessor extends the credit to the lessee. |
| Genesis G80 Electrified | $79,825 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor – on the Genesis website the advertised lease offer makes mention of the tax credit! |
| Genesis GV60 | $59,290 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor – on the Genesis website the advertised lease offer makes mention of the tax credit! |
| Genesis GV 70 Electrified | $65,850 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor – on the Genesis website the advertised lease offer makes mention of the tax credit! |
| Hyundai Ioniq 5 | $41,450 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor – on the Hyundai website the advertised lease offer makes mention of the tax credit! |
| Hyundai Kona | $33,500 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Jeep Wrangler 4xe | $54,735 | $3,750 | $7,500 | This vehicle is only eligible for half the maximum credit when purchased, but could be eligible for the full $7,500 credit if leased, if the lessor extends the credit to the lessee. |
| Jeep Grand Cherokee 4xe | $60,360 | $3,750 | $7,500 | This vehicle is only eligible for half the maximum credit when purchased, but could be eligible for the full $7,500 credit if leased, if the lessor extends the credit to the lessee. |
| Kia Niro EV | $39,330 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Kia EV6 | $48,700 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Mercedes-Benz EQS Class | $104,400 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Mitsubishi Outlander Plug-in Hybrid | $39,845 | – 0 – | $5,977 – $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor. Mitsubishi website shows a lease offer on this vehicle applying the credit! But the credit may be less than $7,500 since vehicle cost may not reach $50,000 depending on exact trim and options chosen. |
| Nissan LEAF | $28,040 | – 0 – | $7,500 | All electric vehicle, only eligible for credit when leasing, if offer is extended by the lessor |
| Volkswagen ID.4 | $38,995 | $7,500 | $7,500 | This vehicle is eligible for the tax credit whether purchased or leased. If leased, it is only eligible if the lessor extends the credit to the lessee. |
Note: this list of vehicles is not exhaustive. This list may be updated over time as more information becomes available. For more information about electric and hybrid vehicles take a look at this.