Accounting
The clock is ticking for cheap EV leases after Trump’s win
If the incoming Trump administration eliminates
President-elect Donald Trump’s transition team intends to revoke the tax credit for purchasing an EV, Reuters
“If you’re on the fence, right now is probably going to be one of your better opportunities to buy or lease an EV at a good price, at least for a few years,” said Chris Harto, a senior policy analyst at Consumer Reports. “Some of the cheapest ways to get into an electric vehicle over the past year has been an EV lease.”
Megan Varner/Bloomberg
In October, leases accounted for 79% of EV sales at dealerships, according to Jessica Caldwell, executive director of insights at automotive research firm Edmunds.com Inc. “When you see the tax credit applied to a three-year lease combined with some of the generous incentives the automakers themselves are offering, the EV deals are pretty compelling,” she said.
This week, for instance, you can drive home a luxury electric BMW i4 for $460 a month, about the same price as leasing a middle-of-the-road gasoline Toyota Camry. Hyundai, meanwhile, is currently offering its sporty electric Ioniq 5 for $199 a month on a two-year lease.
Edmunds’ numbers don’t include automakers such as Tesla and Rivian that sell directly to consumers and that don’t release the percentage of their customers who opt for leases.
The IRA limits the purchase tax credit to electric vehicles assembled in North America and requires a percentage of battery components and critical minerals to originate there or in countries that have signed a free-trade agreement with the U.S.
But the sticker price can’t exceed $55,000 for a car or $80,000 for an SUV, and only households earning up to $300,000 annually and individuals making up to $150,000 can claim the tax credit. EVs
Unless they lease. Those restrictions don’t apply to the federal government’s
Caldwell said leasing is also attractive to prospective EV drivers worried about the risk of purchasing a $50,000 car only to have its technology become outdated while still owing payments. “We’ve also seen pretty heavy depreciation for electric vehicles, so if you lease you’re not left holding the bag if the vehicle declines rapidly in value after three years,” she said.
If the lease loophole is closed, “EVs are going to have to sell on their own merit, which we know is always tough when there is a new technology and people still have concerns about battery longevity, range and infrastructure,” said Caldwell.
Congress would need to pass legislation to kill the EV tax credits, according to Romany Webb, deputy director of the
The agency “could, for example, revise the list of vehicles that are eligible for the tax credits or add new procedures for claiming the credits,” said Webb. “That could make it more practically challenging for people to take advantage of the credits and, generally, introduce a lot of uncertainty and confusion that could make people less willing to purchase or lease EVs.”
Consumers aren’t the only ones who would feel the impact if the credits are tightened or repealed. “These tax credits are for consumers, but they’re also really for automakers so that they can scale up the production of electric vehicles and can remain competitive,” said Harto. “So while repealing the tax credit will hurt consumers, it probably hurts automakers even more.”
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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