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Tax Tip: Plug-In Electric Vehicles

May 02, 2011

Congress created tax incentives for the purchase of plug-in electric vehicles in the Emergency Economic Stabilization Act of 2008 and revised them in the 2009 Recovery Act. The amount of the credit is equal to the sum of $2,500 plus $417 for each kilowatt hour of traction battery capacity in excess of four kilowatt hours. The maximum credit can range from $7,500 to $15,000, depending on the gross vehicle weight rating of the vehicle.

To qualify, the vehicle must be placed in service after December 31, 2008, and must be acquired by December 31, 2009. The vehicle must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States

The American Recovery and Reinvestment Act of 2009 amended section 30D effective for vehicles acquired after December 31, 2009. Internal Revenue Code Section 30 provides a credit for qualified plug-in electric vehicles. The credit is equal to 10 percent of the cost of a qualified plug-in electric vehicle and is limited to $2,500. Qualified vehicles may include low-speed vehicles or vehicles that have two or three wheels.

Vehicles must be acquired after February 17, 2009 and before January 1, 2012. The vehicle must be acquired for use or lease and not for resale. Additionally, similar to the 2008 Act, the original use of the vehicle must commence with the taxpayer, and the vehicle must be used predominantly in the United States.

A vehicle may qualify for the credit under the 2008 Act or the 2009 Recovery Act; however, taxpayers cannot claim both credits for the same vehicle. Credits for the plug-in electric vehicles may be claimed whether placed in service for business or personal use. If used in a trade or business, the amount of the credit is treated as a business credit. Otherwise, it is treated as a nonrefundable personal credit. In either case, the amount of the credit reduces the taxpayer's basis in the vehicle.

In order to identify which vehicles qualify for these credits or if you have any additional questions, consult your ATA representative.

 

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