Kia to Rely on Lease Loophole to Make Its EVs Eligible for Tax Credit

Chris Teague
by Chris Teague

Though their electric vehicle lines are among the most compelling new zero-emissions models, Kia and Hyundai’s EVs don’t currently qualify for federal tax credits because of where they’re built. Both are working toward bringing EV production to the U.S., but in the meantime, Kia is looking to take advantage of a little-known provision in the new rules that allow customers to receive the credit on ineligible vehicles when leasing.

The provision is open until 2032 and allows the full $7,500 credit to be applied as a discount on the purchase price instead of a year-end tax credit. Kia’s South Korean-built EV6 and Niro EV don’t qualify for a tax credit because new rules under the Inflation Reduction Act require battery raw materials to come from a country with which the U.S. has a free-trade agreement, and the EV has a North American final assembly location.

Kia said it’s projecting leases to grow to 30 to 40 percent of its EV program, but it won’t be long before the automaker has a domestic factory with EV production capabilities. It’s retooling its West Point, GA factory to build the upcoming EV9, which comes later this year. Early production models won’t be eligible for the credit, as they’ll be shipped in from South Korea, but the American-built SUVs will be, so long as their price slides in under the $80,000 price cap set by the Treasury.

[Image: Kia]

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Chris Teague
Chris Teague

Chris grew up in, under, and around cars, but took the long way around to becoming an automotive writer. After a career in technology consulting and a trip through business school, Chris began writing about the automotive industry as a way to reconnect with his passion and get behind the wheel of a new car every week. He focuses on taking complex industry stories and making them digestible by any reader. Just don’t expect him to stay away from high-mileage Porsches.

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  • SCE to AUX SCE to AUX on May 04, 2023

    H/K has been doing this for a while.

    An interesting feature: you can't declare the deduction on your taxes, but you also have no income or tax requirements to qualify. Then, if you buy the vehicle when the lease is up, you have already realized the savings.

    This is exactly how it went with my 19 Ioniq 1 in late 2018. Starting as a lease, Hyundai deducted the $7500 off MSRP ($30k), making the lease price $22500. I ended up buying the car for $13k after the 3-year lease was up.

  • VoGhost VoGhost on May 04, 2023

    Reminds me of the Section 179 tax loophole for vehicles > 6,000 lbs.