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Electric Car RebatesEV Tax Credits For Plug-In Battery Powered Cars |
Alternative Energy Tax Credits
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It seems like the money available for EV buyers and builders changes with
every session of Congress, so make sure you check the latest information
from the IRS before making a purchase based on an expected tax credit. The
good news is that most Federal money for EV's is in the form of tax credits,
which means you will get the full value of the credit when you file your
taxes. Tax credits are basically rebates from the government rather than
from the manufacturer. And for the time being, it appears that you can get
the money even if you are a high earner who is subject to the AMT (Alternative
Minimum Tax).
Up until a couple months ago, the plug-in tax rebates were only available for low speed battery vehicles. But the latest IRS bulletin titled "New Qualified Plug-in Electric Drive Motor Vehicle Credit" (based on Section 30D) makes money available for production cars, such as the Nissan Leaf, Tesla, etc. What's even better is that the buyer can rely on the manufacturer certification that a credit is available and how large that credit will be. There is a nasty gotcha involved, namely that the money is intended to accelerate the adoption of EV technology, it's not a permanent subsidy. So after the manufacturer sells 200,000 battery powered cars of a given model, the tax credit begins to phase out over the course of the next twelve months. DUring the first six months of the phase-out, the credit is reduced by 50% and during the last six months of the phase out, the credit is reduced by 75%. The basic credit, regardless of the cost of the EV, starts with a flat $2,500. From there, if the car is powered by a battery with a capacity of at least 5 kWh (kilowatt hours), you can add $417 to start, plus another $417 for each addition kWh of battery capacity above the 5 kWh base. However, the extra credit for battery capacity cannot exceed $5,000, so the maximum possible tax credit for an EV is $7,500. Another way to look at it is that there is only ($7,500 - $2,500 - $417) = $4,583 available for additional credit above the 5 kWh battery capacity, or ($4,583 / $417) = 11, which means that the money runs out at a battery capacity of 16 kWh. The Nissan Leaf has a battery capacity of 24 kWh, so a third of that is "wasted" from the rebate standpoint. The Tesla Model S and the Coda Sedan with their much larger LiIon battery packs also see the credit max out long before the battery capacity. Not surprisingly, the Chevy Volt battery pack capacity is exactly 16 kWh, receiving the maximum credit for the minimum effort. You go, government owned car manufacturers. However, the money is only available for the first owner of the car, it must be used predominantly in the U.S. It's also interesting to note that the new tax credit was written so that the new electric cars from American manufacturers what use a gasoline engine for recharging (as opposed to strictly plug-in) may qualify for the credit. The main engineering requirement is that the EV be primarily powered by battery and capable of being recharged by an external source, but it doesn't appear ti prohibit onboard recharging with a small gasoline engine. If you're an early EV buyer, you may also get some perks from the manufacturer, like the free home charging station (240 V) that GM is offering to the first few thousand buyers of the Chevy Volt.
The original laws pertaining to plug-on electric cars were passed before there were any highway worthy models in production. The tax code describes qualified plug-in electric vehicles as low speed, ie. neighborhood transportation. There were quite a few jokes about this being the "golf cart" bill because it appeared to be written for battery powered golf cart manufacturers. To qualify, the top speed of the EV was limited to 25 mph (but it had to be able to reach 20 mph by the end of a flat mile), and use an external recharger. So this credit clearly isn't for hybrids or even extended range battery power cars that are always powered by the electric motor but use an onboard gas engine for recharging. So the IRS ended up having to add the caveat that the vehicle must be made for public roads, not for golf, giving rise to the term "neighborhood car". It also must be used primarily in the U.S., as if you're going to be going on cross border jaunts at 25 mph, you must be the first owner of the EV (no credit for second hand), and has to be titled before the deadline for the credit and in use that tax year. Also, for 4 wheel vehicles, the battery capacity must be greater than 4.0 kWH, and for two or three wheel vehicles, the battery capacity must be above 2.5 kWH. The credit for these low speed vehicles is 10% of the cost up to $2,500 (ie, pay $25,000 and get $2,500 back). The more attractive option for hobbyists is to convert a gasoline or diesel powered car to a plug-in battery powered car. The tax credit here is also 10% of the cost of the conversion up to a maximum of $4,000 (ie, spend $40,000 on a conversion and get $4,000 back). Surprisingly, this credit appears to be available even if you took the hybrid credit for the car the year before. So if you don't like putting gas in your hybrid, you can pull the engine, spend some money turning it into a plug-in and get another credit.
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