Electric vehicles

Electric vehicles (EVs) purchased in or after 2010 may be eligible for a federal income tax credit of up to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.

This credit replaces an earlier credit for EVs purchased in 2009.

Small neighborhood electric vehicles do not qualify for this credit, but they may qualify for another credit.

Requirements

The be certified for the credit, the vehicle must meet the following requirements:

• The vehicle must be made by a manufacturer (i.e., it doesn't include conventional vehicles converted to electric drive).
• It must be treated as a motor vehicle for purposes of title II of the Clean Air Act.
• It must have a gross vehicle weight rating (GVWR) of not more than 14,000 lbs.
• It must be propelled to a significant extent by an electric motor which draws electricity from a battery which
  • has a capacity of not less than 4 kilowatt hours and
  • is capable of being recharged from an external source of electricity.

The following requirements must also be met for a certified vehicle to qualify:

• The original use of the vehicle commences with the taxpayer.
• The vehicle is acquired for use or lease by the taxpayer, and not for resale. (The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.)
• The vehicle is used mostly in the United States.
• The vehicle must be placed in service by the taxpayer during the 2009 calendar year.

Phase Out & Termination

The credit begins to phase out for vehicles once the manufacturer produces 200,000 eligible plug-in electric vehicles (i.e., plug-in hybrids and EVs) as counted from January 1, 2010. IRS will announce when a manufacturer exceeds this production figure and will announce the subsequent phase out schedule.


Claiming the Credit

For vehicles acquired for personal use, report the credit from Form 8834 on the appropriate line of your Form 1040, U.S. Individual Income Tax Return.

Unlike the credit for plug-in electric vehicles purchased in 2009, this credit can be used toward the alternative minimum tax (AMT).

If the qualifying vehicle is purchased for business use, the credit for the business use of an electric vehicle is reported on Form 3800, General Business Credit.