Plug-in Electric Cars Get a Jolt From Tax Incentives
If the idea of buying a car and getting a Federal Income Tax Credit sounds good to you, keep reading. But you’ll have to get comfortable with the newest in automotive technology—plug-in electric hybrid cars. If a Chevy Volt, Nissan Leaf or (later this year) Ford Focus might be in your purchase plans, be sure you know the tax credit rules:
How much of a tax credit do I get?
The initial credit is $2,500, plus: $417 for each 5 kilowatt hours of rechargeable battery power, up to $5,000. The maximum credit is $7,500.
It appears the both the Volt and the Leaf will qualify for the maximum credit of $7,500. For a list of plug-in motor vehicles and credit amounts for which the IRS has received appropriate information and acknowledged eligibility, see tinyurl.com/4yg77q5 or pluginamerica.org.
How soon do I have to purchase the Plug-in vehicle?
Congress has enacted this credit with limitation. The limit is by manufacturer. Each manufacturer can have the credit attached to the first 500,000 plug-in vehicles that it produces. So it is not an urgent decision to make, but over the next few years the credit will probably go away.
Can my business use the credit? Can I lease the car?
The vehicle has to be purchased, not leased. Businesses can use the credit against the current year’s regular tax and not AMT. The unused credit, if any, can be carried forward one year or back 20 years under the general business credit rules. For personal use vehicles, the credit is non-refundable. The credit is against both regular and AMT tax. The credit is combined with other credits such as foreign tax credit in determining the maximum credit taken. Some planning will be involved to make sure that your tax in the year of purchase of plug-in will exceed the maximum credit of $7,500. Otherwise the difference will be wasted.
How is the credit claimed?
The credit is claimed on Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit. This is another one of those complicated forms you will probably welcome some assistance in preparing and attaching to your tax return. Call your ShindelRock accountant for more details and to alert him or her to your pending purchase. Happy driving!