New IRS Guidance Opens the Door to Tax Credits for Leased EVs That Bypass Final Assembly Rules

Chris Teague
by Chris Teague

Tax credits for electric vehicles have never been the easiest to understand, and the changes recently made with the Inflation Reduction Act have caused even more confusion. The legislation rebooted the federal EV tax credit, bringing new requirements on final vehicle assembly and raw materials sourcing. Though at first, it appeared the new rules would exclude EVs from some of the country’s most popular automakers, the IRS released more guidance that seems to leave a small loophole open for hopeful buyers seeking a credit.

The IRS Fact Sheet seems to state that leased vehicles may qualify for a tax credit, regardless of where they were assembled. Starting January 1, buyers can qualify for commercial clean vehicle credits of up to $7,500, and the IRS language does not include limitations on final assembly location.

This could be a significant win for automakers like Hyundai and Kia, whose vehicles were effectively cut out of the tax credits with the new legislation. That said, many brands qualify for the credits under the new requirements, including Ford, GM, Nissan, Rivian, and even Audi.

Part of the new requirements focuses on battery raw materials sourcing. Materials must come from the United States, a country with which it holds a free-trade agreement, or be recycled in North America. However, the IRS announced earlier this month that it would delay guidance on the requirement until March, which may make some EVs eligible for a short period that wouldn’t be under the new rules. 

[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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10 of 16 comments
  • ScarecrowRepair ScarecrowRepair on Dec 30, 2022

    So one could lease an EV for, say, one year and get a $7500 tax credit, and do it again next year, and again, and again ...? I realize you could buy a new EV every year and do the same, but lease?

    • See 1 previous
    • 95_SC 95_SC on Jan 03, 2023

      I think it is limited to one a year. Still if I could lease a cheap enough car then yeah, this could be advantageous

  • Jalop1991 Jalop1991 on Dec 30, 2022

    So this is nothing more than "I have long pink hair and I wear a dress, therefore I'm a woman"?

    All we have to do is...declare something out a desire for the fantasy to be true, and voila?

    I declare the speed limit number to actually mean a percentage of the speed of light, officer.

    • VoGhost VoGhost on Dec 30, 2022

      If you're so insecure about your gender that you use an article about tax rules to attack trans people, then maybe it's time for some introspection?

  • Kcflyer Kcflyer on Dec 31, 2022

    Some say this is a perfect example of reverse robin hood policy. I disagree because dems are steeling from the middle class (not the poor, the poor don't pay taxes) but maybe the goal is to make the middle class poor? Inflation Reduction Act, yeah right, another example of you can call the bill anything you want when you control both houses of congress and the presidency.

    • See 2 previous
    • 95_SC 95_SC on Jan 03, 2023

      Maybe eat a few less cheeseburgers and most Americans needing it wouldnt

  • ToolGuy ToolGuy on Jan 01, 2023

    USA! USA!