February 27, 2020
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To encourage U.S. taxpayers to move away from gasoline-powered motor vehicles, over the years, Congress has provided various tax credits for purchasing electric or alternative fuel vehicles. These credits generally come with an expiration date or a sales limitation. For example, from 2006 through 2010, a credit was available to taxpayers who were purchasing a hybrid vehicle – this was when hybrids such as the Toyota Prius were beginning to take off in the U.S. auto market. Since then, the tax credit that has drawn the most attention is the 4-Wheeled Plug-In Electric Drive Vehicle Credit, created by Congress in 2009.
Four-Wheeled Plug-In Electric Drive Vehicle Credit – This nonrefundable credit is worth up to $7,500 for the purchase of new electric vehicles and has been a stimulus for car companies to manufacture “green” vehicles and an incentive for consumers to purchase such vehicles. Although there is no specific date in the future when this credit will expire, the number of vehicles each manufacturer can sell that can qualify for the credit is limited. That limit is enforced by phasing out the credit by manufacturer once the manufacturer sells its 200,000th electric vehicle. As a result, Tesla vehicles purchased after 2019 won’t qualify for a credit, and qualifying vehicles made by Cadillac and Chevrolet and purchased in the first quarter of 2020 are eligible for just a partial credit, or for no credit if bought after March 31, 2020. The following table shows the current credit phaseouts:
*All qualifying models
As Congress developed the tax provisions included in the Appropriations Act of 2020, passed late in 2019, there was some hope that the 200,000th-vehicle limit would be increased so that future sales of vehicles from the manufacturers already affected by the phaseout would be eligible for the credit. This didn’t happen. However, Congress did extend through 2020, the following lesser known credits that had originally expired at the end of 2017:
Qualified Fuel Cell Motor Vehicle Credit – The credit equals a base credit amount, which depends upon the vehicle’s weight class plus, for passenger cars or light trucks (vehicles weighing 8,500 pounds or less), an additional amount that depends upon the vehicle’s rated fuel economy, as compared to a base fuel economy.
A qualifying fuel cell vehicle must be propelled by power derived from one or more cells that directly convert chemical energy into electricity by combining oxygen with hydrogen fuel stored onboard the vehicle. A passenger automobile or light truck must meet the Clean Air Act’s emissions standards for that make and model year of vehicle. The vehicle, which must be made by a manufacturer, must be new and acquired for use or lease and not resale.
The credit amount is $4,000 if the vehicle has a gross vehicle weight rating (GVWR) of not more than 8,500 pounds or $10,000 if the vehicle has a GVWR of more than 8,500 pounds but not more than 14,000 pounds. For heavier vehicles, the credit is even more. And for a qualified fuel cell motor vehicle that is a passenger car or light truck, the credit is further increased by $1,000 to $4,000, based on specified fuel efficiency levels.
This credit was previously allowed through 2017 and was retroactively reinstated for 2018 and extended through 2020 by the Appropriations Act of 2020.
Two-Wheeled Plug-In Electric Vehicle (Motorcycle) Credit – A credit equal to 10% of the cost, for a maximum credit of $2,500 per vehicle, of electric drive (2-wheeled) motorcycles was retroactively reinstated for 2018 and extended through 2020. To qualify, the motorcycle must be propelled by a rechargeable battery with a capacity of at least 2.5 kilowatt hours that can be recharged from an external source. It must weigh less than 14,000 pounds; be capable of going 45 mph or more; and be manufactured primarily for use on public streets, roads, and highways. Used motorcycles don’t qualify.
Alternative Fuel Vehicle Refueling Property Credit – This credit, which has also been reinstated for 2018 and extended through 2020, is 30% of the cost of the refueling property put in service during the year, with the following credit limitations: the maximum personal use credit is $1,000 per home and is non-refundable, while the maximum credit for depreciable property used in business is $30,000 and is part of the General Business Credit.
Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used to (1) store or dispense a clean-burning fuel into the fuel tank of a motor vehicle propelled by that fuel, but only if the property is located at the point where the fuel is delivered into the vehicle’s tank, or (2) recharge an electric vehicle, provided the recharging property is located at the point where the vehicle is recharged.
Refund Opportunity – If you qualify for any of the reinstated credits for 2018, your 2018 return can be amended to claim the credit. Generally, the amended return will need to be filed by April 15, 2022.
If you have questions about any of the credits discussed in this article or would like assistance in amending your 2018 return, please give this office a call.
- Hybrid Credit (Expired)
- Four-Wheeled Plug-In Electric Drive Vehicle Credit
- Qualified Fuel Cell Motor Vehicle Credit
- Two-Wheeled Plug-In Electric Vehicle (Motorcycle) Credit
- Alternative Fuel Vehicle Refueling Property Credit
- Refund Opportunity
To encourage U.S. taxpayers to move away from gasoline-powered motor vehicles, over the years, Congress has provided various tax credits for purchasing electric or alternative fuel vehicles. These credits generally come with an expiration date or a sales limitation. For example, from 2006 through 2010, a credit was available to taxpayers who were purchasing a hybrid vehicle – this was when hybrids such as the Toyota Prius were beginning to take off in the U.S. auto market. Since then, the tax credit that has drawn the most attention is the 4-Wheeled Plug-In Electric Drive Vehicle Credit, created by Congress in 2009.
Four-Wheeled Plug-In Electric Drive Vehicle Credit – This nonrefundable credit is worth up to $7,500 for the purchase of new electric vehicles and has been a stimulus for car companies to manufacture “green” vehicles and an incentive for consumers to purchase such vehicles. Although there is no specific date in the future when this credit will expire, the number of vehicles each manufacturer can sell that can qualify for the credit is limited. That limit is enforced by phasing out the credit by manufacturer once the manufacturer sells its 200,000th electric vehicle. As a result, Tesla vehicles purchased after 2019 won’t qualify for a credit, and qualifying vehicles made by Cadillac and Chevrolet and purchased in the first quarter of 2020 are eligible for just a partial credit, or for no credit if bought after March 31, 2020. The following table shows the current credit phaseouts:
|
VEHICLES BEGINNING PHASEOUT IN 2019
|
|||||||
|
Date Acquired
>>> MANUFACTURER |
Before 2019
|
Jan.–Mar. 2019
|
Apr.–June 2019 | July–Sept. 2019 | Oct.–Dec. 2019 | Jan.–Mar. 2020 | After Mar. 2020 |
| Tesla* | $7,500 | $3,750 | $3,750 | $1,875 | $1,875 | $0 | $0 |
| Chevrolet* | $7,500 | $7,500 | $3,750 | $3,750 | $1,875 | $1,875 | $0 |
| Cadillac* | $7,500 | $7,500 | $3,750 | $3,750 | $1,875 | $1,875 | $0 |
As Congress developed the tax provisions included in the Appropriations Act of 2020, passed late in 2019, there was some hope that the 200,000th-vehicle limit would be increased so that future sales of vehicles from the manufacturers already affected by the phaseout would be eligible for the credit. This didn’t happen. However, Congress did extend through 2020, the following lesser known credits that had originally expired at the end of 2017:
Qualified Fuel Cell Motor Vehicle Credit – The credit equals a base credit amount, which depends upon the vehicle’s weight class plus, for passenger cars or light trucks (vehicles weighing 8,500 pounds or less), an additional amount that depends upon the vehicle’s rated fuel economy, as compared to a base fuel economy.
A qualifying fuel cell vehicle must be propelled by power derived from one or more cells that directly convert chemical energy into electricity by combining oxygen with hydrogen fuel stored onboard the vehicle. A passenger automobile or light truck must meet the Clean Air Act’s emissions standards for that make and model year of vehicle. The vehicle, which must be made by a manufacturer, must be new and acquired for use or lease and not resale.
The credit amount is $4,000 if the vehicle has a gross vehicle weight rating (GVWR) of not more than 8,500 pounds or $10,000 if the vehicle has a GVWR of more than 8,500 pounds but not more than 14,000 pounds. For heavier vehicles, the credit is even more. And for a qualified fuel cell motor vehicle that is a passenger car or light truck, the credit is further increased by $1,000 to $4,000, based on specified fuel efficiency levels.
This credit was previously allowed through 2017 and was retroactively reinstated for 2018 and extended through 2020 by the Appropriations Act of 2020.
Two-Wheeled Plug-In Electric Vehicle (Motorcycle) Credit – A credit equal to 10% of the cost, for a maximum credit of $2,500 per vehicle, of electric drive (2-wheeled) motorcycles was retroactively reinstated for 2018 and extended through 2020. To qualify, the motorcycle must be propelled by a rechargeable battery with a capacity of at least 2.5 kilowatt hours that can be recharged from an external source. It must weigh less than 14,000 pounds; be capable of going 45 mph or more; and be manufactured primarily for use on public streets, roads, and highways. Used motorcycles don’t qualify.
Alternative Fuel Vehicle Refueling Property Credit – This credit, which has also been reinstated for 2018 and extended through 2020, is 30% of the cost of the refueling property put in service during the year, with the following credit limitations: the maximum personal use credit is $1,000 per home and is non-refundable, while the maximum credit for depreciable property used in business is $30,000 and is part of the General Business Credit.
Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used to (1) store or dispense a clean-burning fuel into the fuel tank of a motor vehicle propelled by that fuel, but only if the property is located at the point where the fuel is delivered into the vehicle’s tank, or (2) recharge an electric vehicle, provided the recharging property is located at the point where the vehicle is recharged.
Refund Opportunity – If you qualify for any of the reinstated credits for 2018, your 2018 return can be amended to claim the credit. Generally, the amended return will need to be filed by April 15, 2022.
If you have questions about any of the credits discussed in this article or would like assistance in amending your 2018 return, please give this office a call.
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