Planning to Rent an Electric Vehicle? The Tax Incentive 'Workaround' Ends Shortly
In recent years, the number of people leasing electric vehicles (EVs) has grown significantly, thanks in part to the benefits that come with leasing, such as lower down payments and access to newer models. However, this trend may be about to change.
The federal EV lease tax credit, which has helped reduce the cost of EV leases and potentially lowered monthly payments, is set to expire later this year. The credit, worth up to $7,500 for qualifying EVs, will no longer be available after September 30, 2025, according to the "One Big Beautiful Bill Act" signed into law on July 4, 2025.
This means that starting October 1, 2025, neither lessees nor purchasers will be able to claim the federal EV tax credit on new or leased electric vehicles. As a result, electric vehicle lease prices are likely to increase after this date if automakers do not introduce alternative incentives.
Up until now, dealerships and manufacturers could often pass the federal tax credit benefit on to lessees, effectively lowering lease costs. However, with the closing of the "lease loophole," that federal benefit will disappear, potentially pushing lease prices higher.
It's important to note that current income and vehicle qualifications remain valid up to the expiration date, including income limits and vehicle price caps. After September 30, 2025, no federal tax credit will apply to purchases or leases of eligible vehicles.
The Inflation Reduction Act (IRA) of 2022 contains billions of dollars in clean energy tax incentives, but the act does not extend the federal EV lease tax credit. There is still a tax credit available for leased electric vehicles, but it belongs to the lessor, not the lessee.
In April 2022, over 40% of electric vehicles were leased, according to Edmunds. With the end of the federal EV lease tax credit looming, consumers may want to consider their options carefully. It remains to be seen whether automakers will introduce new incentives to offset the loss of the federal tax credit, but for now, it seems likely that lease prices for electric vehicles will increase after September 30, 2025.
[1] Federal EV Lease Tax Credit to End in 2025
[2] Federal EV Tax Credit: What's Changing and What It Means for Consumers
[3] EV Tax Credit: What You Need to Know About the Federal Incentive
[4] EV Tax Credit: What's Changing and What It Means for Consumers
[5] Federal EV Tax Credit: What's Changing and What It Means for Consumers
[1] The expiration of the federal EV Lease Tax Credit in 2025 may lead to an increase in electric vehicle lease prices due to the loss of federal benefits that had previously helped lower lease costs.
[2] With the end of the federal EV Tax Credit's lease loophole in 2025, consumers may need to reconsider their leasing decisions as the potential disappearance of the federal benefit could result in higher lease prices for electric vehicles.
