Incentives Are Still Available for Buying Certain Electric and Hybrid Vehicles - A Global Tax Blog Article from KLR

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Incentives Are Still Available for Buying Certain Electric and Hybrid Vehicles

posted May 30, 2019 by Deborah Pallasch, CPA in the Global Tax Blog

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There’s good news for “green” car shoppers: You may qualify for various tax credits if you choose a new plug-in electric vehicle or a new plug-in electric-gas hybrid vehicle. But the incentives vary depending on the model you choose and where you live. Here are the details.

Federal Tax Credit

For federal tax purposes, you may claim an income tax credit of $2,500 to $7,500 for purchasing a qualified electric-powered vehicle for use in the United States. The size of the credit depends on the vehicle’s size and battery capacity. The credit can offset your income and alternative minimum tax (AMT) obligations.

This federal tax break is available until 200,000 qualified vehicles have been sold in the United States by each manufacturer. After a manufacturer reaches that threshold the credit begins to phase out for that manufacturer.

Tesla and General Motors were the first manufacturers to reach this threshold in the third and fourth quarters of 2018, respectively. As a result, credits for these manufacturers’ vehicles will phase out as follows:

Percentage of Otherwise Allowable Amount Tesla General Motors

50%

Jan. 1, 2019 – Jun. 30, 2019 Apr. 1, 2019 – Sept. 30, 2019
25% Jul. 1, 2019 – Dec. 31, 2019 Oct. 1, 2019 – Mar. 31, 2020
0% After Dec. 31, 2019 After Mar. 31, 2020


However, on April 10, 2019, a bipartisan coalition introduced a bill in Congress that would extend the one-time federal tax credit for buyers of electric, plug-in hybrid, and hydrogen-powered vehicles; so, stay tuned. Tax credits aren’t available for used or leased vehicles. The credit for the latter belongs to the manufacturer, but you might be able to use it as a bargaining chip when negotiating lease terms. 

Additional Incentives

Depending on where you live, new electric vehicles — including Tesla and GM vehicles and any other models that reach the federal phaseout threshold in the future — may be eligible for financial and nonfinancial incentives from your state, city, insurance provider or utility company. These incentives may include:

  • State and local tax credits,
  • Vehicle or infrastructure rebates or vouchers,
  • Reduced vehicle registration fees,
  • Special types of loans,
  • Low-cost charging rates, and
  • High-occupancy vehicle lane exemptions.

For example, the Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) program offers rebates of up to $1,500 for the purchase or lease of battery electric vehicles and fuel-cell electric vehicles, and $450 for zero-emission motorcycles. In addition, the Massachusetts Electric Vehicle Incentive Program (MassEVIP) provides grants to businesses with 15 or more employees for installing Level 1 and 2 charging stations. The program will provide 60% of the funding — up to $50,000 — for the hardware costs.

Likewise, the Driving Rhode Island to Vehicle Electrification (DRIVE) program offers rebates of up to $2,500 for the purchase or lease of qualifying new electric vehicles. And the Connecticut Hydrogen and Electric Automobile Purchase Rebate (CHEAPR) program offers incentives of up to $5,000 for the purchase or lease of a new eligible battery electric, plug-in hybrid electric or fuel-cell electric vehicle.

Research before Buying

The incentive programs are subject to numerous rules and restrictions. So, it’s important to discuss the eligibility requirements before you make a purchase or negotiate a lease. Our tax experts can help you evaluate the options based on your personal circumstances and preferences.