The $7,500 tax credit program for electric car purchases is getting stricter next year, as it will for the next several years to come. That means some cars that currently qualify for the credit won’t be eligible starting January 1, complicating things for consumers trying to get into an EV cheaply.
But there’s a silver lining: Thanks to a loophole in the law, you may still be able to get a discount if you lease a disqualified car, rather than buy it. Carmakers have taken advantage of a leasing loophole since the new tax credit regime went into effect. And nothing will change there in 2024.
The workaround is simple. Cars bought by leasing companies are considered commercial vehicles by the government and can earn a $7,500 tax credit under a separate, less restrictive program than the one for consumer purchases. Leasing companies can then pass on those savings to lessees by offering discounted monthly payments. That will continue to be true in 2024, regardless of updates to the consumer credit.
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This is part of why you can get a screaming lease deal on EVs like the Hyundai Ioniq 6 and Kia EV6—models that don't qualify for a government incentive when purchased.
The revised EV tax credit for consumers, passed as part of 2022’s Inflation Reduction Act, introduced a whole bunch of extra stipulations to the longstanding incentive program: household income limits, a North American assembly requirement, vehicle price caps and restrictions on where a vehicle’s critical battery minerals and components can come from. Starting next year, those sourcing requirements will get stricter, and a new rule will go into effect prohibiting battery parts and materials from Chinese companies. (To be clear, those rules don't apply to commercial vehicle purchases.)
Under the stricter rules, some cars will lose their favorable standing with the Treasury Department. Tesla says some versions of the Model 3 won’t be eligible for a credit come 2024, and Ford says its Mach-E SUV is unlikely to qualify either.