$7500 tax credit loophole confirmed to work for Cybertruck lease?

[jt65]

I am hearing the same thing from sales rep.

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[voxel]

Anybody quoting $350 for the buyout fee hasn't read the lease contract and is talking out their ass.

 

[cgoats21]

 

[JerseyMike]

Great! But I guess the 80k car price cap and 300k family income cap still apply?

the 300k family income doesn't apply to leases...80k might but that is prior to delivery

 

[Macgreiner]

Imagine if Tesla had a normal PR dept. and answered these questions?

 

[mongo]

the 300k family income doesn't apply to leases...80k might but that is prior to delivery

There is no price cap on the commercial 45W credit.

 

[mongo]

Imagine if Tesla had a normal PR dept. and answer these questions?

If Tesla directly said you could buyout your lease on day 1 and save money doing it, that could easily cause the IRS to characterize the transaction as resale, not a lease. In which case, they (Tesla) would not be eligible for the credit.

 

[cgoats21]

Imagine if Tesla had a normal PR dept. and answer these questions?

Yeah I would have bought one already if they could confirm it. I’m sure others would too

 

[sirozha]

Imagine if Tesla had a normal PR dept. and answer these questions?

Especially, as they are trying to pull all demand levers they can to deliver as many vehicles as possible by the end of the year. They would sell a lot of Cybertrucks if they would allow us to buy out the leases say after the first lease payment. And if they do allow this, and we don't know about it, they are shooting themselves in the balls by not making this information clear to the potential buyers. Just incredible lack of diligence on the part of Tesla management.

 

[sirozha]

If Tesla directly said you could buyout your lease on day 1 and save money doing it, that could easily cause the IRS to characterize the transaction as resale, not a lease. In which case, they (Tesla) would not be eligible for the credit.

They could establish an early-buyout penalty of, say, $1,000. It would still be worth it. With a penalty, it can't be presumed as an intent to sell under the guise of leasing.

 

[mongo]

They could establish an early-buyout penalty of, say, $1,000. It would still be worth it. With a penalty, it can't be presumed as an intent to sell under the guise of leasing.

If the terms of the lease incentivize the lease over a cash purchase, the transaction is questionable.
$1k of penalty is still $6.5k of incentive.
That said, if the deal is structured similarly to historical lease practices, that may be a sufficient defense.
https://www.irs.gov/newsroom/topic-...out-qualified-commercial-clean-vehicle-credit

Q6. What factors are used to determine if a transaction is a “lease” for tax purposes? (updated February 3, 2023)

A6. Based on longstanding tax principles, the determination whether a transaction constitutes a sale or a lease of a vehicle for tax purposes is a question of fact. Features of a vehicle lease agreement that would make it more likely to be recharacterized as a sale of the vehicle for tax purposes include but are not limited to:

• A lease term that covers more than 80% to 90% of the economic useful life of the vehicle.
• A bargain purchase option at the end of the lease term (that is, the ability to purchase the vehicle at less than its fair market value at the end of the term) or other terms/provisions in the lease that economically compel the lessee to acquire the vehicle at the end of the lease term.
• Terms that result in the lessor transferring ownership risk to the lessee, for example, a terminal rental adjustment clause (TRAC) that requires the lessee to pay the difference between the actual and expected value of the vehicle at the end of the lease. (Note that special rules exist under section 7701(h) for qualified motor vehicle operating agreements that contains a TRAC.)

 

[sirozha]

Basically, we should just assume that the $7,500 tax credit is going away soon and not rely on this when making a decision to buy an EV. If you can get the credit, consider yourself lucky.

If the $7,500 loophole on leases ever existed, the IRS seems to have caught up on this loophole and is determined to close it up. I guess Tesla doesn't want to be stuck with a $7,500 liability to the IRS for every lease on the Cybertruck that results in an early buyout; hence, Tesla is keeping silent on this issue.

 

[JerseyMike]

All Wheel Drive Cybertruck (Florida Registration)	Cash	Lease (36mo. 10K miles)	Lease (36mo. 10K miles)	Finance (5.99% @ 72mo.)	Finance (5.99% @ 60mo.)	Finance (5.99% @ 36mo.)	Finance (0% @ 60mo.)
Down Payment	$7,500	$7,500	$0	$7,500	$7,500	$7,500	$7,500
Taxes & Registration (Florida)	$5,241	$5,241	$5,241	$5,241	$5,241	$5,241	$5,241
Destination Fee	$1,995	-	-	$1,995	$1,995	$1,995	$1,995
Order Fee	$250	-	-	$250	$250	$250	$250
FL Doc Stamp Fee (finance)	-	-	-	$254	$254	$254	$254
Acquisition Fee (Lease start)	-	$695	$695	-	-	-	-
Disp. Fee (lease return = $395)	-	-	-	-	-	-	-
Purchase Fee (Lease Buyout)	-	$350	$350	-	-	-	-
Monthly Payment	-	$899	$1,142	$1,237	$1,443	$2,271	$1,208
Total Monthly Payments	-	$32,364	$41,112	$89,064	$86,580	$81,756	$72,490
Remainder / Lease Buyout	$72,490	$54,930	$54,930	-	-	-	-
Total Paid	$87,476	$101,080	$102,328	$104,304	$101,820	$96,996	$87,730
Interest		$13,604	$14,852	$16,828	$14,344	$9,520	$254

Using the Tesla App with FEE details for each of the options for my purchase and registration in Florida. Assume always paying the state tax and registration out of pocket.

The Destination and Order Fees do not show for the Lease option, but are replaced with the Acquisition Fee, due at signing. The App defaults a down payment of $7500 for the lease, so I kept it the same across the board.

It did allow me to change it to ZERO down, and it left the Lease Buyout amount the same, and just reduced the "Due at Signing" total. This supports the speculation that the $7500 credit is included in the residual calculation. The term and mileage affect the buyout amount.

CASH is always KING... If you have $70K+ in your cookie jar feel free to drop it on the truck.

If you have $70K+ in a high interest savings account drawing 4.5%, or Tesla Stock, or an S&P Fund, then you have to decide if you will pull it out, or finance.

I have never leased a car. I typically finance them at reasonable terms, pay them off, and keep them forever (10-20 years). My numbers above assume paying the lease in full, then buying out with cash. If you financed the buyout, you would of course have more interest. Although, auto rates will likely be very low in 2-3 years. The lease is kind of like an interest only loan.

I added the hypothetical "0% @ 60 months" option at the end, just to show it is always a great option, free money. It's rare even for traditional brands now a days.

Also, if we were to get the $7500 tax credit next year, the finance numbers would all be the same as if you did ZERO down payment and received the credit at signing.

If the truck flops and doesn't sell 500K units a year, or a CT 2.0 is announced, then it could depreciate a lot. If so, the lease gives you a guaranteed buy back. If it is the best car ever made, as many suggest, then I will likely put 20K+ miles a year on it and never want to get rid of it.

I've not decided what I will do yet. I will likely run all the same numbers on the CB, but I'm not sure if the lease has the credit baked in or not.

Seeing these numbers really makes the lease attractive, keep the money in an index fund and at the end of the lease can see where the market is regarding buying out or not or can buy out early and pay less than if you purchased outright……normally I would never lease but the 7500 loopholes (battery, MSRP and income don’t apply) for EVs makes it much more attractive ( and not just for cybertruck)

 

[mongo]

Basically, we should just assume that the $7,500 tax credit is going away soon and not rely on this when making a decision to buy an EV. If you can get the credit, consider yourself lucky.

If the $7,500 loophole on leases ever existed, the IRS seems to have caught up on this loophole and is determined to close it up. I guess Tesla doesn't want to be stuck with a $7,500 liability to the IRS for every lease on the Cybertruck that results in an early buyout; hence, Tesla is keeping silent on this issue.

It's not a loophole. It's directly called out in the law.

(c) QUALIFIED COMMERCIAL CLEAN VEHICLE.—For purposes of this section, the term ‘qualified commercial clean vehicle’ means any vehicle which— ‘‘(1) meets the requirements of section 30D(d)(1)(C) and is acquired for use or lease by the taxpayer and not for resale,

IRS has already adressed attempts at an end around by selling vehicles via "lease" wink-wink nudge-nudge

 

[sirozha]

It's not a loophole. It's directly called out in the law.


IRS has already adressed attempts at an end around by selling vehicles via "lease" wink-wink nudge-nudge

This is a loophole because this $7,500 tax credit (that is now loop-holed into the leases) was designed for commercial purchases. What happened was that leasing companies realized they could buy these vehicles for themselves, get the $7,500 tax credit, and then turn around and lease these vehicles to you (sometimes passing the $7,500 incentive to you, and other times keeping the entire $7,500 or a portion thereof).

Getting the $7,500 tax credit for leased vehicles was never intended by the law, and, in fact, Joe Manchin was livid when he found out that this loophole became apparent because it bypasses the $80,000 maximum MSRP and the $300,000-per-family AGI limits. And without Joe Manchin, the IRA legislation would not have passed. I'm sure some lobbyists worked hard on getting the $7,500 commercial vehicle credit into IRA by bribing some politicians without disclosing how this can be abused as a loophole.

I'm hoping the $7,500 tax credit will go away in the beginning of 2025, so that people buy EVs based on their merits, and not based on the free money people get from other taxpayers to buy these expensive toys. If you want an expensive toy, by all means buy it, but buy it with your own money, and not with the taxpayers' money.

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