Dhavaljb
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Explain Tax On $7,500 Rebate on Lease Agreement

Sun May 29, 2011 2:34 pm

Hello,

Can someone please explain the ~$695 tax on the lease agreement (for the $7,500 rebate)? I wonder if this can be reclaimed somehow on my state taxes?

Also, I did not see this $695 tax being included on the discussion for lease vs. buy calculations.

LEAFfan
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Re: Explain Tax On $7,500 Rebate on Lease Agreement

Sun May 29, 2011 4:16 pm

Dhavaljb wrote:Hello,
Can someone please explain the ~$695 tax on the lease agreement (for the $7,500 rebate)? I wonder if this can be reclaimed somehow on my state taxes?
Also, I did not see this $695 tax being included on the discussion for lease vs. buy calculations.


It isn't a $7500 rebate, but a federal tax credit. When you lease, Nissan gives you the full $7500 off. Who is your dealer? This is new to me. The agreement I have doesn't include any extra taxes except the state sales tax on each payment.
2013 LEAF SV Del. 2/28/13
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LEAFer
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Re: Explain Tax On $7,500 Rebate on Lease Agreement

Sun May 29, 2011 4:40 pm

Right ... state+local sales taxes on each payment, and those "payments" include the $7,500, because in essence Nissan gives that $7,500 to you and you in turn use it to reduce the capitalized cost.
2011 Silver SL+QC [Mfg: 11/2010] 36mo/15k LEASE
06Jun2013 Status [28.5 months][34,173 miles][11 bars]
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planet4ever
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Re: Explain Tax On $7,500 Rebate on Lease Agreement

Sun May 29, 2011 4:53 pm

Oh, the tax is correct, all right. I certainly had to pay it. Your lease deal is probably set up like mine as $9,499.99 due at signing. That includes several major components:
  • The registration fee is a sort of tax itself, so it is not taxable.
  • The first monthly payment is taxable, but already includes its own tax.
  • The tax itself is not taxable.

But most of the rest of that $9.5K is capital reduction, so is taxable. They jiggle the figures so the tax is correct for the cap reduction but the total comes out $9.5K. Then at the bottom they show how you are going to pay the $9.5K. $7,500 is a "non cash credit" and you have to come up with the other $2K.

Look, one way or another the state needs to get its tax on the full $34K or whatever price of the car. If you bought it you would pay tax up front on the whole thing. Since you are leasing you are paying the tax in installments. But the $7,500 has taken a big whack out of what you owe (that's what cap reduction means), so the state demands its share.
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ttweed
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Re: Explain Tax On $7,500 Rebate on Lease Agreement

Sun May 29, 2011 5:08 pm

Dhavaljb wrote:I did not see this $695 tax being included on the discussion for lease vs. buy calculations.
It is not the same in all states, but CA charges sales tax on your whole purchase, including the $7500 "Capital reduction" that Nissan gives you up front for the tax credit that they will collect on the car instead of you under a lease agreement.

There are several threads on leasing. This was discussed in an early one back in January when Omkar posted the first copy of a CA lease agreement on the forum: http://www.mynissanleaf.com/viewtopic.php?f=27&t=2192 The tax on the $7500 credit is included in the item 4.f. The rest of the tax is added to each lease payment, and to the residual value payment if you keep the car. This makes it the same as if you bought the car outright, as you would pay sales tax on the total purchase price then, too. If you do not buy the car (pay off the residual at lease end) but only use it until the lease end and give it back to the dealer, you will not pay sales tax on the residual value, since you never purchased that part of the car.

TT
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