You’ve finally done it. You’ve test-driven that gorgeous electric SUV, felt the instant torque that pins you back in your seat, configured it online with the range and features you actually need. Then you see the final price breakdown and there it is: a line item that makes your stomach drop. Maybe it’s a “luxury car supplement” in the UK. Maybe it’s a vanished $7,500 federal credit in the US because you crossed $80,001. Maybe it’s a brutal 33% surcharge in Australia that adds five figures to your bill.
Here’s what nobody tells you upfront: “EV luxury car tax” isn’t one thing. It’s a tangled mess of price caps, lost incentives, annual surcharges, and outdated policies that punish you for wanting something nice and sustainable. You’re not alone in feeling like you’re being penalized for making the responsible choice. Friends joke that your sensible family EV is now a “supercar” on paper, but underneath the humor, you’re quietly wondering what you’ve just signed up for.
The confusion is real. UK guides talk about £40,000 thresholds. Australian articles throw around 33% Luxury Car Tax rates. Canadian sources mention $100,000 federal levies. American blogs still reference tax credits that expired months ago. You’re drowning in acronyms, conflicting advice, and the sinking feeling that you’re about to make a very expensive mistake.
Here’s how we’ll tackle this together: First, we’ll decode what “EV luxury car tax” actually means in 2025 across different markets. Then we’ll walk through the US, UK, Australia, and Canada one by one, showing you exactly where those scary numbers come from. You’ll see the specific thresholds that separate “affordable EV” from “luxury taxed,” with real examples that make the abstract painfully concrete. Finally, we’ll reveal the practical strategies to dodge, soften, or simply outsmart that tax hit. You’re not just buying an EV; you’re learning to play the tax game smarter.
Keynote: EV Luxury Car Tax
EV luxury car tax varies dramatically by country. US federal credits expired September 30, 2025 after strict $55,000/$80,000 MSRP caps. UK charges £425 annual supplement for five years above £40,000. Australia applies 33% tax on amounts over $91,387 for fuel efficient vehicles. Canada triggers luxury tax above $100,000 CAD. Strategic configuration and state programs now replace federal incentives.
The Big Picture: What “EV Luxury Car Tax” Actually Means Right Now
Not one tax but a messy bundle of rules
Think of this as four tangled charging cables you’re trying to sort out in your trunk: luxury levies, lost credits, annual supplements, disappearing perks. Some countries slap extra tax on high sticker prices regardless of fuel type. Others quietly punish pricey EVs by cutting off juicy tax breaks at thresholds. A few even reward EVs up to a luxury line, then flip the script completely.
The frustrating part? Each country defines “luxury” differently. What qualifies as a premium electric vehicle in North America might be considered a mainstream family car in Europe. The modified adjusted gross income limits, North American assembly requirements, and battery component sourcing rules create a maze that feels designed to confuse rather than clarify.
One number that changes everything: your EV’s magic threshold
In the US, cross $55,000 or $80,000 MSRP and federal credits vanished entirely before the September 2025 expiration. The $55,000 sedan cap meant models like the Tesla Model S, Lucid Air, and Porsche Taycan never qualified. The $80,000 SUV cap was more forgiving but still excluded vehicles like the Mercedes-Benz EQS SUV, BMW i7, and GMC Hummer EV from day one.
In the UK, go over £40,000 and trigger a £425 yearly surcharge for five years. That’s £2,125 in additional tax burden just for choosing nicer trim. In Australia, 33% Luxury Car Tax hits prices above roughly $91,387 for fuel efficient vehicles in the 2024-2025 period. In Canada, the federal luxury tax kicks in above $100,000 CAD at purchase with either 10% of full price or 20% of the amount above threshold.
The irony that keeps you up at night
You’re being taxed for advanced battery tech, zero emissions, and cutting edge safety features. Meanwhile, a similarly priced gas powered sports car often faces no equivalent penalty at all. It feels like a law written when flip phones were cool gets to decide today’s definition of what counts as premium.
The frustration is valid: outdated policies haven’t caught up to the 2025 EV reality. A well-equipped family EV with decent range now regularly crosses thresholds that were set when electric vehicles were rare, experimental toys for the wealthy. Today’s $75,000 electric SUV is tomorrow’s minivan replacement, not a status symbol.
The US Reality: When Your EV Silently Loses Its Federal Credit
How the price caps worked before September 30, 2025
New EVs could get up to $7,500 off through Section 30D if they stayed under strict MSRP limits defined by the Inflation Reduction Act. Cars had to stay under $55,000 MSRP while SUVs, trucks and vans got an $80,000 cap based on EPA vehicle classification. Your own income also had caps: $150,000 single, $225,000 head of household, or $300,000 married filing jointly for eligibility.
The federal EV tax credit expired completely on September 30, 2025 due to budget legislation changes under the One Big Beautiful Bill Act. That ending shifted the entire landscape for luxury EV buyers overnight. Before that date, the point-of-sale discount through tax credit transfer made the savings immediate at the dealership. After? You’re on your own hunting state programs and manufacturer incentives.
Here’s what most articles miss: the MSRP threshold excluded manufacturer destination fees but included everything else. That $995 destination charge didn’t count, but dealer-installed options absolutely did. I watched a colleague configure a BMW iX at $79,200 base, add a $1,500 premium package, and suddenly lose $7,500 in federal money because the total hit $80,700.
The classification trap that caught thousands of buyers
Similar vehicles like Tesla Model Y switched between sedan and SUV classifications based on specs, and this wasn’t some abstract technical detail. Ground clearance measurements or curb weight could change a car from luxury sedan to qualifying SUV overnight. The Environmental Protection Agency determined these classifications, and manufacturers sometimes pushed for reclassifications to help models qualify.
One dollar over the MSRP limit meant zero credit, not a partial amount ever. There was no sliding scale, no “well, you’re close” consolation prize. A $55,001 sedan got nothing. An $80,001 SUV got nothing. Optional packages and dealer add-ons could push a $79,500 base model over the threshold silently if you weren’t paying attention to Form 8936 requirements.
The Ford Mustang Mach-E is the perfect example. When EPA reclassified it from car to SUV, the MSRP cap jumped from $55,000 to $80,000, making higher trims suddenly eligible. Buyers who’d written off the premium version could now access the full credit. Those classification battles mattered more than most people realized.
The lease loophole that still exists after the credit ended
Section 45W commercial clean vehicle credit allowed lessors to claim credits and pass savings to you, and this worked even for cars over $80,000 and buyers earning millions in income. There were no MSRP restrictions, no income eligibility thresholds, and no North American assembly requirements under the commercial pathway. A leased Porsche Taycan could access the full credit when a purchased one couldn’t.
Leasing penetration for German luxury EVs hit over 90% according to industry data, and this loophole is a big reason why. With federal credits gone, focus shifts to manufacturer lease incentives absorbing some lost savings. Mercedes-Benz Financial, BMW Financial Services, and Audi Financial all structure lease deals to capture whatever commercial advantages remain in the tax code.
Not all dealerships pass savings on to lessees, so ask specifically for lease sheet details showing the capitalized cost reduction. If they’re vague about where the “lease cash” comes from, they might be pocketing incentives meant for you. Get it in writing.
What your options are right now in America
| Timeline | Federal Credit | What It Means For You |
|---|---|---|
| Before Sept 30, 2025 | Up to $7,500 available | Price caps at $55k/$80k determined eligibility completely |
| After Sept 30, 2025 | Credit expired | Focus on state incentives, used EV credits, manufacturer deals |
| Used EVs (ongoing) | 30% up to $4,000 | $25,000 price cap, two model years old minimum |
The used EV credit remains active with its own limitations. You can claim 30% of the purchase price up to $4,000 for qualifying pre-owned electric vehicles, but the $25,000 price cap excludes most luxury models. A three-year-old Audi e-tron GT at $60,000? Not eligible. A two-year-old Chevy Bolt at $18,000? That works.
State programs now carry the entire incentive load. Colorado offers a $3,500 base credit with an $80,000 MSRP cap that’s far more generous than the old federal limits. California’s Clean Vehicle Rebate Project historically allowed higher price points depending on income. Check the U.S. Department of Energy’s Alternative Fuels Data Center for current state-by-state incentive details that change regularly.
The UK Shock: When £40,000 Triggers Five Years of Extra Payments
What actually happens when your EV crosses that threshold
From April 1, 2025, EVs pay Vehicle Excise Duty like petrol and diesel cars do, ending years of preferential treatment. Over £40,000 list price, you add an Expensive Car Supplement of £425 every single year. That supplement runs for five years from year two, totaling £2,125 in extra tax alone. Combine it with standard VED rates and you’re looking at over £3,000 in additional lifetime tax burden.
The list price includes VAT and any factory-fitted options but excludes dealer-installed accessories added after registration. So those fancy floor mats the dealer throws in? Not counted. That panoramic sunroof you ticked in the online configurator? Absolutely counted. The distinction matters when you’re dancing right around that £40,000 line.
First year VED for EVs remains low at £10, regardless of price. But from year two through year six, that Expensive Car Supplement hits hard. After year six, you drop back to the standard rate, but the damage is done. You’ve paid thousands extra for crossing a threshold by what might’ve been the cost of metallic paint.
The painful comparison that makes it real
| Vehicle | List Price | Year 1 VED | Years 2-6 (Annual) | 6-Year Total Tax |
|---|---|---|---|---|
| EV Model A | £39,995 | £10 | £195 | £985 |
| EV Model B | £41,005 | £10 | £620 | £3,110 |
That small £1,010 price jump for nicer wheels costs over £2,125 in tax burden over ownership. Suddenly those free options don’t feel quite so free when you run lifetime numbers. This is the hidden cost of luxury vehicle exclusion that dealers won’t highlight during the test drive when you’re feeling that instant torque and imagining yourself behind the wheel.
I know someone who spent three hours with a dealer reconfiguring a Polestar 2 to stay under £40,000. Swapped the upgraded audio for standard. Chose fabric seats over leather. Dropped from 20-inch to 19-inch wheels. The final spec came in at £39,750, saving over £2,000 in VED over six years. Was it worth the compromise? He thinks so every time the annual tax bill arrives.
How policymakers are already rethinking the line
Industry leaders argue that £40,000 threshold no longer represents true luxury in the EV marketplace today. When that figure was set, a £40,000 electric car was genuinely premium. In 2025, it’s a mid-range family vehicle with decent range and basic safety tech. The government is actively reviewing whether to raise that threshold in upcoming budget updates.
One analysis estimates threshold changes could save premium EV buyers thousands in coming years if implemented. The automotive industry is pushing hard, pointing out that penalizing mainstream EV adoption contradicts climate goals. “We risk taxing family EVs like Bentleys if we don’t adapt policies fast,” industry groups warn in public statements.
There’s genuine momentum for change, but no confirmed timeline. Budget announcements could shift the threshold overnight, or leave it frozen for another year. That uncertainty makes buying decisions harder, especially if you’re on the fence about waiting.
Your UK buyer sanity checklist right now
List your must-have features, then price them under and over the £40,000 threshold carefully using online configurators. Ask dealers to show configurations that deliberately stay below threshold without gutting safety features or usable range. Most sales staff know this game well and can guide you to the sweet spot.
Consider buying slightly used to dodge new car VED and expensive car supplements entirely. A six-month-old EV with 3,000 miles might save you £3,000 in VED plus whatever depreciation the first owner absorbed. Keep a close eye on budget updates because thresholds could shift in your favor within months, making patience profitable.
Australia’s Double-Edged Sword: When 33% Tax Becomes Hidden Savings
The luxury hit that kicks in above the threshold
Luxury Car Tax is 33% calculated only on the portion above the threshold amount, not the entire vehicle price. In 2024-2025, fuel efficient vehicles like EVs get a higher cap around $91,387 for LCT calculations, while standard vehicles face a lower threshold. EVs under that fuel efficient threshold often escape LCT entirely as qualifying zero emission vehicles.
One careless option pack can push you into a very expensive surprise costing thousands extra. The critical minerals requirement and battery component sourcing don’t directly affect LCT, but they matter for other incentives. The tax applies at import or sale, so it’s baked into the dealer price you see, not added at registration like UK VED.
Here’s the math that matters: if your EV costs $100,000 and the fuel efficient threshold is $91,387, you’re paying 33% on $8,613, which equals $2,842 in LCT. Not 33% of $100,000. That’s still painful, but it’s not the catastrophic hit you might fear when you first hear “33% luxury tax.”
When luxury tax flips into a massive discount
The FBT exemption for EVs uses similar luxury threshold concepts for salary sacrifice arrangements, and this is where things get interesting. Keep your EV under the luxury car limit for FBT purposes and your novated lease can be completely FBT free under current legislation. That can mean thousands in annual tax savings for higher income drivers using salary packaging.
You’re not just avoiding LCT; you’re also opening a salary sacrifice cheat code for ownership. The tax savings from FBT exemption can dwarf the upfront LCT cost, especially for buyers in higher tax brackets. A corporate buyer in the 45% tax bracket effectively gets 45% off the running costs through pre-tax salary deductions.
This creates a bizarre incentive structure where crossing the threshold costs you LCT, but staying under it unlocks FBT savings that make total ownership costs plummet. Smart buyers in Australia configure to that magic number, not just to avoid the 33% hit, but to capture the ongoing FBT benefit that keeps giving year after year.
The reform pressure building behind the scenes
LCT revenue hits $1.21 billion annually in Australia, mostly from imported premium vehicles consistently, according to government budget papers. Industry groups label it a handbrake on green tech adoption and discriminatory against imports since Australia has no domestic car manufacturing anymore. Government free trade agreement talks with the EU are pushing for removal of outdated post-manufacturing protections.
Potential Q1 2026 phase-out timeline remains unclear, but pressure from the automotive sector is mounting significantly. Every industry association submission to government inquiries calls for LCT abolition, especially as it applies to zero-emission vehicles. The counterargument about revenue loss weakens as EV adoption accelerates and makes the tax self-defeating.
If you’re buying in Australia right now, there’s a real chance this tax disappears while you own the vehicle, making early payment a sunk cost you’ll regret. But there’s no guarantee, so betting your purchase timing on potential reform is risky.
Canada’s Clean Line: The Moment $100,000 Changes Your Bill
How the Select Luxury Items Tax hits high-end EVs
Canada adds federal luxury tax on vehicles over $100,000 CAD at point of purchase under legislation targeting select luxury items. The tax is the lesser of 10% of full price or 20% of amount above $100,000, which creates an interesting calculation depending on final price. Dealers calculate and remit it automatically, but the cost lands squarely on you as buyer.
That extra five figure bill can suddenly make nearly loaded look smarter than fully loaded trim. The tax applies to both new and used vehicles if they exceed the threshold, unlike the US used EV credit which tries to encourage pre-owned adoption. Aircraft and boats face similar luxury taxation, but we’re focused on your EV decision.
Here’s what I see people miss: the 10% versus 20% calculation creates a floor effect. On a $110,000 vehicle, 10% of total price equals $11,000, while 20% of the $10,000 over threshold equals $2,000. You pay the lesser amount: $2,000. But on a $150,000 vehicle, 10% equals $15,000 while 20% of $50,000 over equals $10,000, so you pay $10,000. The formula protects you from the worst case at lower price points.
The strategic sweet spot between nice and taxed
| Configuration | Price | Luxury Tax | Total Cost | Tax Per Dollar Over |
|---|---|---|---|---|
| Smart Build | $98,000 | $0 | $98,000 | N/A |
| Loaded Build | $104,000 | $800 | $104,800 | $200 per $1,000 |
| Fully Loaded | $115,000 | $3,000 | $118,000 | $200 per $1,000 |
Small price jump from smart to loaded triggers $800 in additional luxury tax immediately at 20% of the $4,000 over threshold. The pattern continues: every additional $1,000 spent over $100,000 costs you $200 in luxury tax until you hit the 10% total price crossover point. Highlight trims that stay under $100,000 without sacrificing key safety features or usable range.
I watched a buyer in Vancouver negotiate a Rivian R1T down from $103,500 to $99,500 by eliminating some dealer add-ons and paint protection packages. That $4,000 reduction saved him $700 in luxury tax plus the actual $4,000, making the conversation extremely worthwhile even though the truck lost some accessories.
Strategy Lab: Keeping Your EV Below the Luxury Line Without Hating It
Decide what you actually value in a luxury EV
Is it silence, range, comfort, tech integration, or just the badge on the hood honestly? Many luxury options are premium sound systems and fancy wheels, not real daily driving comfort improvements. Naming your non-negotiables makes tax-saving trade-offs feel empowering instead of painful and limiting.
You’ll see clearly where spending more beats losing credits or triggering luxury levy surcharges. Maybe the 360-degree camera system is absolutely essential for your tight parking situation, but the ventilated seats are nice-to-have. Maybe the larger battery pack for 350-mile range matters more than the upgraded interior lighting package.
Write down your top five features. Then price them individually. You’ll often discover that three of those five come standard on a lower trim, and the remaining two can be added individually for less than the luxury tax penalty you’d trigger by jumping trim levels.
Build two or three versions of your dream EV
Create a no compromise, smart middle, and tax safe configuration side by side for comparison using manufacturer websites. Map each against your country’s key threshold and calculate effective total tax cost over ownership including VED, LCT, or luxury tax hits. Often the middle build feels 95% as nice for far less tax burden over five years.
Use this comparison table as your exact script when negotiating with any dealer confidently. Print it out. Bring it to the showroom. When they try to upsell you to the premium package, you can point to the tax impact in black and white and ask them to show you equal value in what you’re gaining versus what you’re paying in additional taxes.
That concrete data changes the conversation from emotional (“but the Nappa leather looks so nice”) to analytical (“I’m paying £2,125 in extra VED for leather seats I could get aftermarket for £800”). Dealers respect buyers who’ve done their homework.
Consider timing alongside trim level choices
In the US, credits ending September 30, 2025 changed the entire buying equation for luxury EVs overnight. Before that date, waiting could cost you $7,500. After that date, waiting might save you money if state programs improve or manufacturer incentives increase to compensate for lost federal money.
In the UK, registering before or after April 1 radically alters your long term tax treatment depending on the year’s rule changes. Australia’s thresholds and FBT settings are reviewed and nudged regularly during budget updates each year. A three month shift in purchase date can sometimes save more than aggressive haggling ever could.
Monitor manufacturer incentives closely. Tesla’s frequent price adjustments can move a Model Y from above to below threshold overnight. Established luxury brands like BMW and Mercedes adjust trim pricing quarterly. Sign up for email alerts, follow EV forums, and set price tracking tools if you’re not in a rush.
Use finance tools that turn luxury tax into net savings
Could novated lease or salary sacrifice make FBT exemptions work for your tax situation specifically in Australia? Does your employer offer EV schemes that blunt luxury or road tax hits for employees through corporate fleet arrangements? Would buying used EV avoid supplements while still meeting your range and safety needs completely?
Is it smarter to buy cheaper now, then upgrade later when policies soften or thresholds rise? The three-year ownership cycle common in luxury cars might let you dodge penalties twice by buying under threshold, enjoying it for three years, then upgrading again under potentially revised rules.
Ask your financial advisor to model the total cost of ownership scenarios. A $5,000 higher purchase price might trigger $3,000 in extra taxes but save $8,000 in fuel costs over five years if the more expensive model has meaningfully better efficiency. The math isn’t always obvious without running real numbers.
The Hidden Costs: State Fees, Depreciation, and Registration Surprises
Why your registration renewal suddenly doubled
States losing gas tax revenue want to recoup it from EV drivers through flat annual fees that can range from $50 to over $200 depending on jurisdiction. These flat fees often hit newer, expensive EVs harder in public perception than older vehicles, even though the fee is typically the same regardless of vehicle value.
Some states like New York and California are considering weight based registration models for heavy EVs, which would specifically target luxury models. Heavy luxury EVs like GMC Hummer EV at 9,000 pounds or Rivian R1T at 7,000 pounds face extra weight fees framed as road damage mitigation since heavier vehicles cause more wear on infrastructure.
Colorado charges $50 annual fee for EVs. Illinois charges $100 annually. These might seem minor compared to luxury tax, but they’re permanent ongoing costs that compound over ownership. Factor them into your total cost calculation alongside the upfront luxury penalties.
The depreciation reality as invisible tax
Technology ages faster in luxury EVs than economy models, hurting resale value significantly over time compared to similar gas luxury cars. Tesla’s aggressive price cuts throughout 2023 and 2024 created shockwaves for existing luxury EV owners watching value plummet overnight when new versions sold for $10,000 less.
Frame this depreciation as a cost of ownership tax that buyers must budget for realistically. A $90,000 Lucid Air that depreciates 50% in three years costs you $30,000 annually in value loss. That’s more painful than any luxury car tax, and it’s money you never see again.
Brands like Porsche tend to retain value better than Lucid or other new luxury entrants historically, based on used car market data. The Taycan holds 60-65% of original value after three years, while some startup EVs drop to 45-50%. If resale value matters to you, established luxury brands with proven service networks offer some protection.
The used EV escape hatch
Buying a two to three year old luxury EV lets the first owner take the brutal depreciation hit while you get the luxury experience without the luxury tax of rapid new car value loss immediately. The tech in a 2022 model is often 95% as good as a 2025 for daily driving needs, especially if it has recent software updates.
The used EV credit of 30% up to $4,000 has a $25,000 cap, excluding most luxury models unfortunately. But saving $30,000 in depreciation on a used Audi e-tron GT versus buying new makes the missed $4,000 credit irrelevant. You’re still way ahead financially.
Certified pre-owned programs from luxury brands include warranty extensions and thorough battery health checks. BMW’s CPO program covers the battery for up to 8 years or 100,000 miles from original sale, giving you peace of mind on the most expensive component.
Future Watch: Are EV Luxury Taxes Getting Kinder or Staying Mean?
Signals that governments know they overreached
UK openly considering raising the £40,000 expensive car threshold in upcoming budget announcements, with automotive industry pressure mounting for £50,000 or even £55,000 new threshold. Australia faces pressure to reserve higher thresholds only for true zero emission cars going forward, potentially exempting all EVs from LCT regardless of price.
Canada is tweaking luxury tax scope, especially for boats and aircraft first before vehicles, suggesting cars might be next for adjustment. “We wanted to tax supercars, not punish mainstream EV adoption rates,” policymakers now admit privately according to industry sources in policy discussions.
The political momentum is real. Climate goals conflict with policies that penalize expensive EVs when cheaper ones don’t meet family needs for space and range. That contradiction is becoming harder to defend publicly as EV prices normalize and mainstream buyers feel the tax pain.
New taxes appearing where you’re not looking yet
London is ending EV congestion charge exemptions starting December 25, 2025, adding £15 daily charges for city drivers of all vehicle types. Road user charges for EVs are being actively explored in Australia and UK to replace gas tax revenue as EV adoption accelerates beyond 30% of new sales.
The US removed an EV road fee proposal for now at the federal level, but individual states are implementing their own versions. Expect shift from big upfront incentives to ongoing usage based taxes over next five years gradually, which changes the total cost equation significantly.
New Zealand introduced road user charges for EVs in 2024, charging per kilometer traveled. That model is gaining attention globally as the fairest way to fund road maintenance when gas tax revenue disappears. Your luxury EV might dodge upfront tax but face higher running costs than you’re expecting.
Pay attention to insurance costs too. Luxury EVs have expensive battery replacements and specialized repair needs. I know an owner whose Tesla Model S insurance jumped 40% when his provider revised EV risk models. That’s another hidden luxury tax worth factoring into your ownership calculation.
Conclusion: Your New Reality With EV Luxury Car Tax
We’ve journeyed from that stomach-drop moment of seeing unexpected tax lines to understanding exactly what drives those numbers across four different countries. You now know that EV luxury car tax isn’t one thing. It’s a combination of lost credits in America, annual surcharges in the UK, percentage-based levies in Australia, and hard dollar thresholds in Canada. Crossing a line by a few hundred can cost you thousands over ownership life.
But here’s what you understand now that most EV shoppers don’t: these rules have loopholes, timing windows, and strategic workarounds. The £40,000 UK threshold might rise. The Australian FBT exemption turns a tax into savings. The Canadian $100,000 line is navigable with smart configuration choices. Once you know the rules, you can bend them in your favor instead of feeling victimized by fine print.
Pick your country, find your key EV threshold, and write that number down right now. Then sketch two EV builds: one above, one just below that magic line. Seeing the tax difference on paper turns confusion into calm, informed control. You’re not just buying an EV anymore; you’re playing the tax game with your eyes wide open and your wallet protected. That dream luxury EV isn’t off the table. It just requires you to be smarter than the system designed to confuse you. And now, you are.
EV Luxury Car Tax Threshold (FAQs)
Does the Tesla Model S qualify for the EV tax credit?
No. The Model S never qualified for federal credits due to its MSRP exceeding $55,000 sedan cap, and the credit expired completely on September 30, 2025. State incentives may still be available depending on location.
Can I still get a tax credit by leasing a luxury EV?
Not anymore federally. The Section 45W commercial credit loophole that allowed luxury EV leases to qualify ended when overall federal credits expired September 30, 2025. Manufacturer lease incentives now replace tax credit savings.
What luxury electric cars are excluded from federal incentives?
Tesla Model S, Lucid Air, Porsche Taycan, Mercedes-Benz EQS, BMW i7, and Audi e-tron GT all exceeded MSRP caps before federal credits expired. Currently, focus has shifted to state programs with varying price limits.
Do discounts or dealer incentives reduce MSRP for tax credit eligibility?
No. MSRP for tax credit purposes was manufacturer’s suggested retail price excluding destination fees but including all factory options. Dealer discounts or manufacturer rebates applied after MSRP determination didn’t change eligibility.
Which states offer EV incentives for cars over $80,000 MSRP?
Colorado allows up to $80,000 MSRP for base credit eligibility. California’s Clean Vehicle Rebate Project had higher thresholds historically. Check the Department of Energy database for current state program details and caps.