With tax season fast approaching, it’s time to determine which tax credits you qualify for. Whether you’ve already purchased a plug-in hybrid electric vehicle (a PHEV) or you’re thinking about purchasing one to help offset some of next years taxes, there is quite a bit of information that you need to know in order to maximize your savings. Tax credits (and rebates) are available both at the federal level (a maximum of $7,500) and the state level, depending on the model you select and where you live. There are also federal tax credits available for full-electric vehicles, however there are no longer any available for clean diesel or regular hybrid (non-plug-in) vehicles, nor are there any federal tax credits remaining for electric vehicle charging stations.
To qualify for the federal plug-in hybrid car tax credit, the vehicle must meet a number of criteria:
1) The vehicle must be made by a manufacturer, meaning that to qualify you cannot take a conventional (or standard non-plugin hybrid) vehicle and covert it to a plug-in hybrid.
2) The vehicle must be treated as a motor vehicle for purposes of title II of the Clean Air Act.
3) The vehicle must have a gross vehicle weight rating (GVWR) of 14,000 pounds or less (all plug-in hybrid cars should have a GVWR less than 14,000 pounds).
4) The vehicle must be propelled to a significant extent by an electric motor which gets its energy from a battery with a capacity of 4 kilowatt hours (kWh) or more that can be recharged using an external source of electricity (in other words, it must be a plug-in hybrid).
5) The vehicle must be new.
6) The vehicle must be acquired for use or lease by the taxpayer, and not for resale (otherwise the dealer would be able to apply for the credit).
7) The vehicle must be used mostly in the United States.
8) The vehicle must be placed in service by the taxpayer during or after the 2010 calendar year.
The amount of the tax credit for plug-in hybrid cars is determined by the size of the battery, and the number of vehicles sold. Vehicles with a 4 kWh battery receive a credit of $2,500, plus $417 for each kWh of battery capacity over 4 kWh, up to the total maximum of $7,500. Only the first 200,000 of each model sold after December 31st, 2009 qualify for the full credit before it starts to be phased out, however with only around 300,000 total plug-in hybrid and electric vehicles sold since then, this is not yet a concern (the most popular plug-in hybrid, the Volt, has only sold approximately 75,000 units).
Federal plug-in hybrid vehicle tax credits:
Year / Make / Model Tax Credit Amount
2012 Fisker Karma Sedan $7,500
2014 Cadillac ELR $7,500
2011–15 Chevrolet Volt $7,500
2012–15 Toyota Prius Plug-in Hybrid $2,500
2014 VIA Motors 2500 Extended Range Electric Passenger Van $7,500
2014 VIA Motors 1500 Extended Range Electric Truck 4WD (All body styles) $7,500
2014 VIA Motors 2500 Extended Range Electric Cargo Van $7,500
2014 VIA Motors 1500 Extended Range Electric Truck 2WD (All body styles) $7,500
It’s important to note that these are non-refundable tax credits, and not rebates. In order to fully claim them, your tax liability must be more than $7,500; credits cannot be used to more than offset your liabilities so that you receive a refund. It may be possible to get around this by leasing the car and having the credits claimed by the leasing company (as they would be the actual owners).
For more information on the federal tax credits, visit http://www.fueleconomy.gov/feg/taxphevb.shtml and http://www.afdc.energy.gov/laws/fed_summary.
Depending on your state, there may be additional refunds or tax credits available for the purchase or lease of a PHEV.