IT PAYS TO BUY ELECTRIC... IF YOU DO YOUR RESEARCH
If you know anything about electric cars and/or PHEV (Plug In Hybrid Electic Vehicles) you may have heard a thing or two about the federal tax credits associated with buying or lreasing one. However, like many others, you may be confused about which plug-in cars qualify for electric vehicle tax credits? If that sounds like you, don't fret. You're not alone. The federal rules are often difficult to understand, even for the lawyers who drafted them. To make things a little easier, here's our guide to plug-in electric vehicle tax credits.
How Much Is the Credit?
You'll often hear that a credit is worth "up to" a certain amount. "Up to" is the critical modifier. The federal incentive is usually referred to as a flat $7,500 credit, but it's only worth $7,500 to someone whose tax bill at the end of the year is $7,500 or more. Let's say you buy a Nissan Leaf or other eligible vehicle and you owe $5,000 in income tax for a particular year. That's all the tax credit will be. Uncle Sam's not writing a refund check for the other $2,500. And an unused portion of the credit can't be applied against the following year's taxes.
The credits also are based on the electric car's battery size. For some models, the maximum can fall well below $7,500. The Toyota Prius Plug-In, a hybrid hatchback that was discontinued after the 2015 model year, only qualified for a $2,500 federal tax credit.
What Vehicles Currently Qualify for the Federal Credit?
(As of January 9, 2017)
|2014–17||BMW||i3 (all models)||EV / PHEV||$7,500|
Statistics are compliments of The US Department of Energy.
We do anticipate that additional vehicles will be added to the list, such as Tesla, but this is the list of current cars of of the date of this article.
What's The Fine Print for Federal Electric Vehicle Tax Credits?
Of course there is. In addition to the rule that limits the federal tax credit to the original buyer of a qualified advanced-technology or alternative fuel vehicle, there are a few other conditions you should know about:
* If you're leasing a vehicle, the credit stays with the leasing company, which is the actual owner of the car or truck. In most cases, however, the tax credit has been factored into the cost of the lease, so the customer still benefits. Lease programs for the Chevrolet Volt and Nissan Leaf, for instance, include the $7,500 tax credit to lower the lease payments.
*The federal tax credit isn't applicable to an electric vehicle being purchased for the purpose of reselling it. That's a gray area, though, and would be tough for authorities to prove.
*The vehicle must primarily be used in the United States.
*Plug-in and battery-electric vehicles must be built by qualified manufacturers in order to qualify for the full $7,500 credit.
*Plug-in hybrids and battery-electric vehicles also must have battery packs that are rated for at least 4 kWh of energy storage and are capable of being recharged from an external source.
*The IRS says that manufacturers are not required to certify to the agency that vehicles meet the requirements to qualify for the various credits. For vehicles not listed on the Energy Department website or on the IRS list of qualified vehicles, a buyer can generally rely on the manufacturer's representation that the vehicle is eligible. That statement can either be in writing or on the company's website. The same thing goes for electric motorcycles, plug-in and EV conversions, three-wheel EVs and low-speed EVs.
*The IRS, of course, always reserves the right to reject a claim for a tax credit.
Do Electric Vehicle Tax Credits Run Out?
Yes. The government is phasing out the electric vehicle tax credits as sales volume increases. And you can bet tha the faster electric cars catch on the faster this tax credit will go away.