Electric Cars

Electric Cars

This is what the IRS says about Plug-In Electric Vehicles

“Plug-in Electric Drive Vehicle Credit (Section 1141): The new law modifies the credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. To qualify, vehicles must be newly purchased, have four or more wheels, have a gross vehicle weight rating of less than 14,000 pounds, and draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity. The minimum amount of the credit for qualified plug-in electric drive vehicles is $2,500 and the credit tops out at $7,500, depending on the battery capacity. The full amount of the credit will be reduced with respect to a manufacturer's vehicles after the manufacturer has sold at least 200,000 vehicles.”

“Plug-In Electric Vehicle Credit (Section 1142): The new law also creates a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012. To qualify, a vehicle must be either a low speed vehicle propelled by an electric motor that draws electricity from a battery with a capacity of 4 kilowatt hours or more or be a two- or three-wheeled vehicle propelled by an electric motor that draws electricity from a battery with the capacity of 2.5 kilowatt hours. A taxpayer may not claim this credit if the plug-in electric drive vehicle credit is allowable.”

Plug in vehicles have been around for over 15 years and new ones are coming to market soon. The Chevy Volt is one and both Mitsubishi and Chrysler have electric vehicles on the drawing board. You need to make sure any electric vehicle you purchase qualifies for the credit. You also need to determine if the driving range of the car suits your needs. They generally travel less than 50 miles on a single charge although one claims to go 150 to 200 miles.

The new law sets a limit that once the manufacturer sells 200,000 vehicles, they will quickly lose the tax credit. Something a few people noticed is that when the Toyota Prius came out it cost $24,000 and you got a $3,000 tax credit. There was a waiting list and people jockeyed to move up on the list. Toyota quickly sold a lot of hybrid cars and eventually the cars no longer qualified for the credit. Magically the cost of the car dropped to $21,000 and they were available to drive off the lot. Last year they were even offering special deals on the Prius. So expect the same thing to happen with the new plug in cars.

By the way, there is nothing wrong with this. The goal of the credit was to give the financial viability of the hybrids a push. That goal was met and now they are a fixture on the highway.

The IRS has not provided guidance on how the plug in credits will work. Expect the information to be out in the fall.

Here is a link to an IRS article that talks about all the new credits.

http://www.irs.gov/newsroom/article/0,,id=206871,00.html