There are several incentives from the IRS to buy an electric vehicle right now.
A tax credit is available for the purchase of a new qualified plug-in electric drive motor vehicle that draws propulsion using a traction battery that has at least five kilowatt hours (kWh) of capacity, uses an external source of energy to recharge the battery, has a gross vehicle weight rating of up to 14,000 pounds, and meets specified emission standards. The minimum credit amount is $2,500, and the credit may be up to $7,500, based on each vehicle’s traction battery capacity and the gross vehicle weight rating.
Basic Summary of the Electric Vehicle Tax Credit
- If your total tax liability is $7500 or more after all your deductions and other credits, IRS would refund you the $7500.
- If your total tax liability is less that $7500 after all your deductions and other credits, IRS would refund you up to your tax liability.
- Tax liability is the net income tax you owe IRS.
- If you are married and filing jointly, and your taxable income is over $73,000, you are more likely to make full use of the credit.
Remember that this is a non-refundable credit. Meaning that if you owe less than your credit amount before applying it, you will not get to use the entire amount. And it does not carry over.
Information about the $7500 Electric Vehicle Tax Credit
Please note, not all electric cars will qualify for this, and some may only qualify for a partial credit (Dependent on their battery size). For example, the Toyota Prius plugin hybrid only qualifies for $2,500, and the Ford Fusion or C-Max only receive $4,007.
This tax credit applies to vehicles acquired after December 31, 2009. For more information, see the Internal Revenue Service (IRS) Plug-In Electric Vehicle Credit website and IRS Form 8936, which is available via the IRS Forms and Publications website.
Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Credit Phase Out
The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Several manufacturers have begun selling cars very close to the limit. It is always best to check with a car dealer before making the sale if the vehicle will qualify for the incentive. Also remember, that some states may have additional tax credits for electric and energy efficient vehicles. It will be worth a taxpayers to check into these state energy efficient tax credits.
Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.