02/09/2011

The Taxman Is Coming: EV Buyers to get $7,500 tax rebate

The Obama Administration has plans of putting one million electric vehicles (EVs) on American roads by 2015. Auto manufacturers like Ford, GM, and Nissan are stepping up to the challenge and are making plans to increase production in electric vehicles to meet President Obama’s goal. Governments have been enticing car buyers to purchase electric vehicles by offering tax breaks and special privileges.   States like California offer incentives for auto buyers to purchase electric cars by offering $5,000 rebates.  Washington and New Jersey allow zero-emission cars to be free from sales tax. Some states even allow free meter parking and carpool perks for EVs.  But are these special treatments and tax breaks just a tease?

The price tags advertised to consumers by EV manufacturers actually have a catch: car buyers have to wait until tax time to claim the credit and benefit from the savings of going electric.  However, what consumers are given is the full tax credit discount applied to the MSRP price of the car.  But not everyone is entitled to the full $7,500 tax credit.  The Tax Code assumes that taxpayers have no dependents, no other tax credits, and that they take the standard deduction.  For example, a married couple would have to have an income of atleast $74,300 and cannot claim other tax credits or dependents to get the full amount of the credit.  Taxpayers are restricted by other tax credits and deductions because these will decrease the amount of the Electric Vehicle Credit. Another drawback is that the EV credit does not roll over from year-to-year and must be taken for the year in which the EV was purchased.
The President plans to change the $7,500 tax credit into rebates for buyers of electric vehicles. This change would mean that buyers would not have to wait until tax season to realize their benefit, but would be able to receive cash back immediately during the sale of the vehicle.

Nissan Leaf, Chevrolet Volt, Coda Sedan, Tesla Roadster

Credit for Table: cars.com

Source: Forbes Magazine

IRS:

FORM 8834 Qualified Plug-In Electric and Electric Vehicle Credit

FORM 8936 Qualified Plug-In Electric Drive Motor Vehicle Credit


Author: Alex Marinov

Alex Marinov is the president of RCG Logistics LLC, with years experience in the shipping and freight industry. His main interest include sustainable building design, video production and automobiles.