Tax on Cap Cost Reduction

[JeffD]

I am leasing a Rivian in Florida and just found out that I am being charged $681 in sales tax for the $7500 cap cost (ev Credit) that Rivian is applying. I know that if I put a down payment to reduce my monthly payments I would be charged sales tax, but Rivian is applying the ev credit not me. I told them I won’t take the lease if this is the case.

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[Golfer04]

You are wrong. The tax credit is not a price reduction. It is in lieu of a down payment. Sale price remains the same.

 

[JeffD]

You are wrong. The tax credit is not a price reduction. It is in lieu of a down payment. Sale price remains the same.

If I understand you, you are saying that Rivian’s ev credit $7500 is sales taxed to me and I am responsible?

 

[jjswan33]

If I understand you, you are saying that Rivian’s ev credit $7500 is sales taxed to me and I am responsible?

I can't speak to Florida but that is the case in many states. Rivian does not have a choice, basically you pay tax on the capitalized cost (MSRP - Residual), since the tax credit is applied to reduce that you have to pay the tax. The rest of the tax is likely in your monthly payment.

Same would be true if you bought a tax credit eligible vehicle. You would pay tax on the sales price and get the tax credit later.

I encountered this issue as an Oregon resident when I wanted to lease a car in Seattle, I don't pay tax in Oregon but since the sale was in Washington I would have to pay the tax on that cap cost reduction.

 

[Golfer04]

This is complicated. If your Rivian's price was below $80,000 and you purchased the vehicle outright you could not have the $3750 tax credit applied at purchase and then claim it when you file your 2024 taxes. The lease loophole allows companies to offer the tax credit to customers as a purchase price credit even if the price is over 80,000. But the customer HAS to lease. I know it is stupid, but that's the way the law is written.

 

[Golfer04]

It might be still be $7500 on a lease too (I forgot). A good way to understand it is you are selling your tax credit to Rivian who is crediting it towards your lease purchase price. Transaction doesn't change the sale price; just the cash you need at closing (and your payment).

 

[DucRider]

This is why some leases are structured to utilize the Tax Credit to artificially raise the residual value and/or reduce the money factor. This is more advantageous to those truly leasing the vehicle, but reduces/eliminates the benefits of the credit for those that are utilizing a lease as a method to purchase the vehicle.
Raising the residua by $7,500 has essentially the same impact on your monthly payments as a cap cost reduction. The amount of depreciation you are paying for is the same in both scenarios.

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