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Income Tax Breaks and Your Hybrid Car

March 5, 2013 by admin 6 Comments

It happens. You purchase a new car and wonder if there is a tax break or incentive offered. Here on Auto Trends, we are frequently asked if certain vehicles qualify for a tax rebate or a tax credit, including hybrid electric vehicles.

Nissan LEAF

Nissan LEAF buyers can seek a $7,500 tax credit.

Tax Incentives

Federal tax incentives are offered and do include a select group of hybrids, namely of the plug-in hybrid electric vehicle kind. A federal tax credit of up to $3,400 was previously available for standard hybrid models such as the Toyota Prius, Honda Insight and the Ford Fusion Hybrid, but those tax breaks were phased out and eliminated after December 31, 2010.

Today’s tax breaks for fuel efficient vehicles cover plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs). A full credit of $7,500 is offered, but that amount can come in lower based on a vehicle’s battery charging capacity.

Mitsubishi i-MiEVFor BEVs, that means a $7,500 vehicle credit. For PHEVs, the amount varies although the first PHEV, the Chevrolet Volt, can garner a $7,500 tax credit for buyers.

Propulsion Energy

To understand how the IRS determines the credit, a read up on the Plug-In Electric Drive Vehicle Credit (IRC 30D) is necessary. Specifically, the current law covers those vehicles acquired after Dec. 31, 2009. The IRS states that, “the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.”

Clear as mud, right?

Fortunately, the EPA publishes tax credit information on its website revealing that there are (as of publication) few cars that currently qualify. And, of those vehicles listed, the tax credit ranges from the base $2,500 to the maximum $7,500.

IRS Form 8834

Buyers of the Chevrolet Volt and Fisker Karma score a $7,500 tax credit while the incentive for Toyota Prius PHEV buyers is $2,500. The only other two models qualifying for a tax break are the Ford C-MAX Energi and the Ford Fusion Energi. Buyers of those vehicles can receive a tax break of up to $3,751.

2013 Ford Fusion Energi

Tax Breaks

You should also know that the incentive for qualifying vehicles is a tax credit. A tax credit reduces your tax balance due while a tax rebate gives you money back regardless of whether you owe money or not.

So, if you owe the IRS $8,000 this year and bought a Chevrolet Volt, you will send the IRS $500 ($8,000 minus the $7,500 credit = $500) at tax time. If you owe the IRS less than the tax credit, the balance of the credit rolls over to the next tax year. You will need to fill out IRS Form 8834 — Qualified Plug-In Electric and Electric Vehicle Credit — and attach it to your tax return to receive the credit.

State Tax Credits

Besides federal help, taxpayers in some states may qualify for additional incentives. In California, tax breaksfor fuel-efficient vehicles include both categories mentioned here plus fuel-cell electric vehicles.

Incentives and other tax breaks for your area are listed on the Plug In America website.

Filed Under: Special Tagged With: Chevrolet Volt, Ford Fusion Energi, hybrid car, income tax, IRS, Nissan LEAF, tax breaks, tax credit

What Tax Breaks Are Available For Fuel Efficient Vehicles?

March 19, 2012 by admin 4 Comments

If you are in the market for a new car, you may be wondering what sort of tax breaks are available for buyers of fuel efficient cars. Not just any car, mind you, but those that come with an electric motor, have lower levels of emissions and get excellent mileage. You recognize that the prices of electrified vehicles are much higher than comparable gas-powered vehicles, twice as high in some cases, and you want to know if there is some relief available for buyers.

Well, the good news is that there is relief. Your help comes in the form of federal tax breaks or credits and, in some cases, credits or other forms of assistance on the state level. Depending on your state, that is.

Federal Tax Breaks

Realizing that the rules and parameters of receiving assistance are subject to change, the following information is current as of May 2013. We’ll update this information from time to time, but having an inquisitive nature can help you find if there are tax breaks we might have missed or have been changed for you in particular. The following are some of the tax breaks that are available from the federal government:

2012 Toyota Camry HybridHybrids — At present, hybrid models such as the Hyundai Sonata Hybrid, the Toyota Prius and the Ford Fusion Hybrid are no longer eligible for a tax credit. However, if you purchased such a vehicle by the end of December 31, 2010, and you did not seek a tax credit for up to $3,400 on your tax return, then you may be able to amend your return to receive that credit. You have three years to amend your tax return, therefore if your purchase was in 2009 or earlier, then it is too late to amend it.

PHEVs — Plug-in hybrid electric vehicles or PHEVs are among the newest EV models to be introduced to the market. Thus, buyers of these models can qualify for a federal income tax credit of up to $7,500. The Chevrolet Volt, introduced in December 2010, is the first PHEV and has since been followed by a PHEV Toyota Prius, Ford Fusion Energi and the Ford C-MAX Energi.

Mitsubishi i-MiEV
North American i-MiEV.

EVs — Pure electric vehicles or EVs run solely on electricity. There is no gas engine and no pollutants are emitted. That same tax credit of up to $7,500 applies here and covers a number of vehicles. The first vehicle to qualify was the Tesla Roadster, which is already out of production and will soon be replaced by a different model. Vehicles that you can purchase today include the Nissan Leaf, the CODA Sedan, the Fisker Karma, Mitsubishi’s i-MiEV, Chevy’s Spark EV and the Ford Transit Connect EV. Other models, such as a battery-electric version of the Ford Focus, are also available with more models coming to the market.

CNGs — With all of the natural gas available in the United States, you would think that several compressed natural gas or CNG vehicles would be built and tax credits given. Unfortunately, neither case currently applies. Only one production model, a CNG Honda Civic, is available today. A tax credit of $4,000 was available, but it has not been renewed. There is federal legislation being considered to offer a tax credit for these vehicles as well as to increase the tax credits elsewhere, but that has not happened yet.

Chevrolet Cruze DieselDiesels — One of the easiest types of fuel efficient vehicles you can obtain are diesels. Each of the German manufacturers sell diesels including Mercedes-Benz, Audi, Volkswagen and BMW. Even Ford, General Motors and Chrysler offer diesel engines for heavy duty pickup trucks. For 2013, we’ll see a diesel option with the Chevrolet Cruze. Alas, just like regular hybrids, the $3,400 federal tax credit has expired. Go ahead and consider a diesel, but don’t look for federal assistance as you make your purchase.

State Tax Breaks

Tax breaks or incentives on the state level are available, but you must be a resident of that state to qualify. Some states, such as California, have multiple programs available including a $2,500 tax rebate for purchasers of select PHEV and zero emissions vehicles. Golden State residents who are served by the Los Angeles Department of Water and Power may also qualify for rebates of up to $2,000 if they install a Level 2 EVSE charger with a separate time-of-use meter at their home. Other breaks include the use of High Occupancy Vehicle lanes and purchase vouchers for fleet buyers.

In Colorado a $6,000 tax credit is available for new purchases and rises to $7,500 for PHEV conversions. Georgia residents can claim a tax credit for 10 percent of the vehicle’s price up to a maximum of $2,500. Other states offer tax credits, tax rebates or special incentives such as a waiver of sales taxes, property tax breaks or a reduction or elimination of certain fees. Check with your state’s DMV for applicable incentives.

References

FuelEconomy.gov: Fuel Efficient Vehicle Tax Incentive Information Center

U.S. Department of Energy: State Incentives and Laws

See Also — Income Tax Breaks and Your Hybrid Car

Filed Under: Special Tagged With: ELECTRIC VEHICLES, HYBRID VEHICLES, PHEV, tax breaks, TAX INCENTIVES, TAX REBATES

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