Can a leased vehicle qualify for this credit?
Yes, lessees of qualifying vehicles are eligible for the alternative fuel vehicle credit. The available credit is calculated by subtracting the value of the vehicle when the lease expires from the cost of the vehicle to the lessor at the time of
the lease transaction (capitalized cost), and dividing that amount by the cost of the vehicle to the lessor at the time of the lease transaction. This percentage is then multiplied by the qualifying expenses to determine the amount of the
expenditure that can be used in computing the amount of the credit. Only the lessor or lessee of the vehicle may claim the credit. If the vehicle is converted at the factory, the lessor has the option of claiming the credit or passing the right to claim the credit to the lessee. If the lessee converts the vehicle, then only the lessee may claim the credit.
Example: John leases a 2010 Toyota Prius valued at $23,550. The vehicle will have a value of $16,750 when the lease expires. The credit is computed as follows:
a. Value at time of lease $23,550
b. Value at end of lease $16,750
c. Line a minus Line b $6,800
d. Line c divided by Line a 28.9%
e. Full credit for vehicle $2,448
f. Credit available on lease line d times line e $707.00