Guest post by Matt Tuers, Plug-in NC Ambassador.
Disclaimer: The following content is not tax advice, nor is the author qualified to give tax advice. Please consult your tax advisor to determine your eligibility – or your vehicle’s eligibility – for any federal or state tax credits.
In 2011, plug-in electric vehicles (EVs) got one more selling point added to their list of benefits: buyer’s would enjoy a $2,500 to $7,500 tax credit under Section 30D(a) of the federal tax code. This credit is claimed using IRS Form 8936 and applies to a long list of vehicles on the market today.
As a refresher, here are the basic rules. The amount that a vehicle is eligible for depends on its battery’s charge capacity: $2,500 is available for batteries that can charge up to 4 kilowatt-hours (kWh), and $417 is added for each additional kWh up to a maximum credit of $7,500. Instead of doing the math yourself, check out this comprehensive guide provided by the IRS.
Used EVs do not qualify for the tax credit, and leased EVs don’t either. When you lease a vehicle you do not hold the title; the leasing firm does. However, the lessor often passes some of the collected tax credit on to the consumer for qualifying EVs.
The Big Question
The EV credit addition to the tax code is now nearly seven years old, and new car dealers, such as myself, are more frequently being asked, “Does the new plug-in EV that I want still get the federal tax credit?”
At the moment, the answer is “yes.” But if you’re holding off on your purchase, you’ll need to keep an eye on the numbers – particularly U.S. sales. Let me explain.
Irs.gov states, “The credit begins to phase out for a manufacturer, when that manufacturer sells 200,000 qualified vehicles,” and the counting began on January 1, 2010. So, when, say, General Motors’ (GM’s) total sales of electric vehicles – the combined sales of Chevrolet Volts, Bolts, Spark EVs and Cadillac ELRs – reach 200,000 nationwide since 2010, the tax credit on its cars will begin to be phased out.
By “phased out” the IRS is referring to a period that begins the fiscal quarter following the quarter in which the 200,000 sales mark has been reached. In the first two following quarters, the tax credit for that manufacturer will be reduced by half, in the next two quarters, 25 percent will remain, and after four quarters (one year), the credit will be gone completely.
The trouble is that a manufacturer’s U.S. sales numbers can be difficult to uncover for industry outsiders. For some brands, a quick Google search will yield up-to-date figures. For others, an expensive subscription to a trade publication may be required.
Based on U.S. sales figures and trends I’ve observed, it’s safe to assume that we have another two to three years before the IRS begins announcing any phase-out periods, and you can be sure that press releases from manufacturers will be distributed to warn you of approaching ones. However, if you’re looking for further indications of the coming phase-outs, watch GM and Tesla. As of this writing, it looks like their tax credits will be the first to go thanks to breakaway sales of the Volt and Model S, respectively.
Matt Tuers is a sales and leasing consultant at Sir Walter Chevrolet in Raleigh, North Carolina. He invites you to call (828-337-9380) or email (email@example.com) him with any questions about buying EVs. He also provides Chevrolet- and car buying-related content at http://matthewtuers.com.