Hi all, so an interesting question and just wonder if anyone has any specific thoughts or has gone through this process.
For IL - when you’ve got a trade-in with equity, towards a new lease, normally it just functions as cap cost reduction, like a down payment, and that cap reduction is still taxed by Illinois. Most states work like this when it comes to taxing leases.
But what if your goal is to ultimately buy the lease out early and are only leasing for an extra rebate (for lease-specific incentives, like the pass-through credit on certain electric / PHEV cars).
In theory, after you sign the lease, could you go to a dealer to buy out your lease, and then trade-in a car at that time to receive a tax credit?
For example… Let’s say your lease has an early buyout price of $55,000. You’ve got a car to trade coming off a lease or on a note with $21K, but the car’s worth $31K.
Essentially, to sum up my Q… rather than just taking the $10K of equity as cap reduction, if your ultimate goal is to buy the vehicle, can you just trade it in at the time of the buyout, and receive receive a tax credit of $31K*taxrate?