Electric Vehicle Tax Credit

Confused about the electric vehicle tax credit? Most people are. Let's try to explain it to you.

You might have gotten the impression that the electric car tax credit means $7500- in your pocket, but it is not really so.

First of all the credit is only up to $7500-. Not every car is even eligible for the full amount. Depending on the type of vehicle how many wheels it has or the size of the battery the tentative electronic vehicle tax credit can be as low 10% of the car cost or $2500-. The actual tax credit can be even lower as you can see below.

Then, there is a phase out after the manufacturer sells over 200,000 cars cutting the credit to half and to a quarter of the amount down to zero.

Also to get the credit you must have a tax liability. The credit will never be more than your tax liability less certain credits, which in some cases will mean no credit at all.

In one word don't automatically expect that your car will cost you $7,500- less than the sales price.

Which forms are needed to get the Electric Vehicle Tax Credit?

  • Form 8834 - Qualified Plug-in Electric and Electric Vehicle Credit This form can be used to claim the tax credit for some two- or three-wheeled electric vehicles or low-speed four-wheeled plug-in electric cars.
  • Form 8936 - Qualified Plug-in Electric Drive Motor Vehicle Credit This form can be used to claim the tax credit for cars that have four wheels and draws electricity from a battery of at least 4 kilowatt hours and can be recharged from an external source of electricity.
  • Form 8910 - Alternative Motor Vehicle Credit This form can be used to claim the credit motor vehicles converted to be propelled by an electric motor.

Some vehicles can meet the criteria for more than one credit but you can only claim one of them, so consult your tax professional as to which form is the correct one to file for you.

How do you know which vehicle is still eligible for the electric vehicle tax credit? The best is to consult the manufacturer, but also discuss this with the car dealer and your tax consultant.

Pre-owned vehicles. Not only used vehicles are ineligible, but if the car dealer puts his name on your vehicle before selling it to you, it is considered a pre-owned vehicle and you cannot get a tax credit for it anymore.

State tax credits. Check your state if there is a tax credit for alternate fuel vehicles. But beware some states also have an alternate fuel tax to offset the amount of tax the state is losing since they cannot collect the gasoline tax for these cars.

Updated December 30, 2012

Go to Federal Energy Tax Credit

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