Lease-Related EV Tax Credits Renewed for 2024
Good news: Following significant advocacy by NADA, on Dec. 20, the U.S. Department of the Treasury renewed the “safe harbor” for Section 45W clean vehicle tax credits for commercial vehicle sales in 2024.
What does this mean: Leasing companies will be able to continue leasing qualifying EVs in 2024 and pass on to consumers up to $7,500 from the tax credit they receive. In addition, other commercial buyers will be able to continue to claim tax credits on their EV purchases.
It is important because: Section 45W commercial clean vehicle tax credits are much more flexible than 30D credits and are not subject to restrictive criteria such as where a vehicle’s battery components or minerals are sourced. Accordingly, for leases, the credit is available for virtually any consumer lease of an EV, regardless of adjusted gross income of the lessee. The leasing company simply passes the value of the tax credit to the customer as a savings. 45W is the reason EVs are leased at a much higher rate than other vehicles.
Don’t forget: Section 45W also applies to commercial vehicles above 14,000 GVWR and provides a credit of 30% of the cost basis up to $40,000 (15% for larger plug-in hybrid vehicles).
So what changed? Luckily, nothing. For cars sold in 2023, the IRS created a safe harbor that allowed both (1) lessors of almost all EV leases and (2) most other light-duty commercial EV purchasers to qualify for a $7,500 tax. Fortunately, the government is extending the safe harbor to 2024.
One last thing: The 30D tax credit for new vehicles will see changes in 2024 based on new criteria for eligible vehicles. NADA will continue to update its members on developments.