Plug-In Electric Drive Motor Vehicle Credit
A tax credit is available for qualified plug-in electric drive motor vehicles, including passenger vehicles and light trucks, acquired after 2009. A qualified plug-in electric drive motor vehicle is a vehicle:
- With a gross weight rating of 14,000 pounds or less
- Acquired for use or lease and not for resale
- The original use of which must commence with the individual claiming the credit
- Used predominantly in the U.S.
- Propelled to a significant extent by an electric motor which draws electricity from a battery that has a capacity of at least 4 kilowatt hours
- That can be charged from an external source of electricity
The base credit amount for qualifying vehicles is $2,500. In the case of a qualifying vehicle that draws on a battery with a capacity of at least 5 kilowatt hours, an additional $417 credit amount is available, plus an additional $417 credit amount for each kilowatt hour of capacity in excess of 5 kilowatts. The maximum amount of total credit available is $7,500.
The portion of the credit attributable to property subject to depreciation (e.g., vehicles used in a trade or business) is treated as part of the general business credit. Generally, the portion of the credit attributable to nondepreciable property (e.g., vehicles not used in a trade or business) can be claimed as a personal tax credit, and applied against both regular income tax and alternative minimum tax (AMT).
The credit begins to phase out for a manufacturer's vehicles when at least 200,000 qualifying vehicles have been sold for use in the U.S. Additional information regarding qualifying vehicles and manufacturer sales can be found on the IRS website.
Tip: A 10 percent credit was available for qualified 2- and 3-wheeled vehicles, acquired during 2012 and 2013, that would otherwise have met the criteria of a qualified plug-in electric drive motor vehicle but for the fact that they did not have at least four wheels. The maximum credit for such vehicles was $2,500. The credit is available for 2-wheeled vehicles acquired in 2015 through 2020.
Credit for Qualified Alternative Fuel (Clean-Fuel) Vehicles
The Energy Tax Incentive Act of 2005 created a nonrefundable tax credit, which is the sum of the qualified hybrid motor vehicle credit, the qualified advanced lean-burn technology motor vehicle credit, the qualified alternative fuel (or clean-fuel) motor vehicle credit, and the qualified fuel cell motor vehicle credit.
Caution: The qualified fuel cell motor vehicle credit is the only credit of the four that is still available for vehicles purchased in 2015 through 2020. The portion of the credit attributable to property subject to depreciation (e.g., vehicles used in a trade or business) is treated as part of the general business credit. Generally, the portion of the credit attributable to nondepreciable property (e.g., vehicles not used in a trade or business) can be claimed as a personal tax credit, and applied against both regular income tax and alternative minimum tax (AMT).
Caution: No credit is allowed for any vehicle used predominantly outside of the United States.
Caution: A limitation is imposed on the number of qualified hybrid motor vehicles and advanced lean-burn technology motor vehicles that can be sold by each manufacturer of such vehicles. The credit is phased out once the manufacturer has sold 60,000 vehicles.
Tip: This credit is available to taxpayers who purchase new, qualifying vehicles. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.
Qualified Hybrid Motor Vehicle Credit (Expired)
The qualified hybrid motor vehicle credit amount was based on weight. The credit for light vehicles (8,500 lb. or less) contained two components: (1) the fuel economy credit, and (2) the conservation credit. The fuel economy credit amount (ranging from $400 to $2,400) depended on its fuel efficiency compared to 2002 standards. The conservation amount (ranging from $250 to $1,000) was based on the estimated lifetime fuel savings of the vehicle as compared to a comparable 2002 vehicle. Medium and heavy hybrid vehicles received a credit amount based on a certain percentage of the incremental cost of the hybrid over similar gas powered vehicles.
A qualifying hybrid vehicle is a motor vehicle that draws propulsion energy from onboard sources of stored energy which include both an internal combustion engine or heat engine using combustible fuel and a rechargeable energy storage system (e.g., batteries). A qualifying hybrid automobile or light truck must have a maximum available power from the rechargeable energy storage system of at least four percent. In addition, the vehicle must meet or exceed certain EPA emissions standards. For hybrid cars and light trucks, the credit was available for vehicles placed in service after December 31, 2005, and before January 1, 2011. For vehicles weighing over 8,500 lb., the credit expired December 31, 2009.
Qualified Advanced Lean-Burn Technology Motor Vehicle Credit (Expired)
Like the hybrid vehicle credit, the qualified advanced lean-burn technology motor vehicle credit was the sum of two components: (1) a fuel economy credit ranging from $400 to $2,400, and (2) a conservation credit ranging from $250 to $1,000. A qualifying advanced lean-burn technology motor vehicle had to be placed in service after December 31, 2005, and before January 1, 2011.
Qualified Alternative Fuel (Clean-Fuel) Motor Vehicle Credit (Expired)
The amount of this credit is equal to an applicable percentage multiplied by the incremental cost of the qualifying vehicle. A qualified alternative fuel (clean-fuel) motor vehicle is defined as a motor vehicle that (1) is only capable of operating on an alternative fuel, (2) the original use of which commences with the taxpayer, (3) is acquired by the taxpayer for use or lease, but not for resale, and (4) is made by a manufacturer.
An alternative fuel is compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid at least 85 percent of the volume of which consists of methanol. A different calculation, which would produce a lower credit amount, applies to mixed-fuel vehicles. A qualifying alternative fuel motor vehicle must have been placed in service after December 31, 2005, and before January 1, 2011.
Qualified Fuel Cell Motor Vehicle Credit
The amount of the qualified fuel cell motor vehicle credit depends on the weight of the vehicle, and ranges from $8,000 ($4,000 if placed in service after 2009) to $40,000. If the qualified fuel cell motor vehicle is a passenger car or light truck, an additional credit (ranging from $1,000 to $4,000) applies if certain fuel efficiencies are met based on 2002 standards.
A qualified fuel cell motor vehicle is defined as a motor vehicle that (1) is propelled by power derived from one or more cells that convert chemical energy into electricity by mixing oxygen and hydrogen fuel that's stored on board the vehicle in any form, (2) in the case of a passenger automobile or light truck, receives an EPA certification, (3) the original use of which commences with the taxpayer, (4) is acquired for use or lease by the taxpayer and not for resale, and (5) is made by a manufacturer.
The qualified fuel cell motor vehicle credit applies to vehicles purchased after December 31, 2005, and before January 1, 2021.
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