Congress is trying to turn America green and is giving a credit to anyone who follows suit. Congress started their environmentally friendly vehicle credits when hybrids were introduced into the American Market. Then this past summer, Congress passed "Cash for Clunkers" in an attempt to reduce smog fumes and lessen America's dependence on foreign oil. Now Congress has come out with the Qualified Plug-In Electric Drive Motor Vehicle Credit and the Plug-In Electric Vehicle Credit for those who are environmentally friendly.
The Qualified Plug-In Electric Drive Motor Vehicle Credit is for a propelled motor that draws the majority of its electricity from a battery. There are two versions of the credit Depending on when you purchase your vehicle. The difference between the two versions is based on weight. If you intend to buy a qualifying vehicle weighing more than 13,999 pounds, buy it by the end of 2009. The expiring credit ranges between $2,500 and $15,000 depending on the weight of the vehicle. For 2010 and beyond, the credit ranges between $2,500 and $5,000 and the vehicle must weigh less than 14,000 pounds. Both credits increase by $417 for each kilowatt hour in excess of 4 kilowatt hours in 2009 and 5 kilowatt hours in 2010, with the base capacity of the battery being 4 kilowatt hours for both credits. To qualify for either credit the vehicle must be a NEW qualified vehicle used by the taxpayer and acquired for use not resale. The vehicle must be made by a manufacturer and manufactured to be used primarily on public streets.
The Plug-In Electric Vehicle Credit allows a credit in the amount equal to 10 percent of the cost of any qualified plug-in electric vehicle. This credit is available for purchases between February 17, 2009 and December 31, 2011, and the total amount of the credit can not exceed $2,500. To qualify, a vehicle must be originally used by the taxpayer, acquired for use of the taxpayer, made by a manufacturer for use on public streets, weigh less than 14,000 pounds, and be propelled mainly by an electric motor that draws electricity from a rechargeable battery that has a capacity of at least 4 kilowatt hours or 2.5 kilowatt hours for a vehicle with less than 4 wheels. No taxpayer is allowed to take this credit if they qualify for the Qualified Plug-In Electric Drive Motor Vehicle Credit.
Any of these credits must be used against taxable income and do not carryover to future years. If a taxpayer does not have any taxable income in the year the vehicle is purchased, the taxpayer will not be eligible to receive these credits. Both of the Qualified Plug-In Electric Drive Motor Vehicle Credits have a phase-out after a certain number of qualified vehicles are sold. When a taxpayer purchases a vehicle, the manufacturer must certify the amount of credit available. To ensure that a taxpayer can receive the largest credit amount possible, each taxpayer should consult their personal tax advisor who would be happy to help in any way possible.
Trey Brooks is in the tax department at Hancock Askew & Co., LLC
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