2010 Tax Credits For Energy Efficient Vehicles: Tax Incentives For Electric Cars, Hybrids And Conversions

As part of The American Recovery and Reinvestment Act there were quite a few incentives included for the purchase and retrofitting of electric and hybrid vehicles.  If you’ve been thinking about buying a hybrid, electric vehicle, or even retrofitting an older car, the time may be right since tax credits are now available for you.

Tax Credits For Energy Efficient Vehicles

Here is a look at the basics of the energy efficient vehicle tax credits. From the IRS:

• Plug-in Electric Drive Vehicle Tax Credit: Credits for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009 are now available. To qualify, vehicles must be newly purchased, have 4 or more wheels, have a gross vehicle weight rating of less than 14,000 pounds, and draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity. The minimum amount of the credit for qualified plug-in electric drive vehicles is $2,500 and the credit tops out at $7,500, depending on the battery capacity. The full amount of the credit will be reduced with respect to a manufacturer’s vehicles after the manufacturer has sold at least 200,000 vehicles.  For more information see: Questions and Answers.
• Plug-In Electric Vehicle Tax Credit: The new law also creates a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012. To qualify, a vehicle must be either a low speed vehicle propelled by an electric motor that draws electricity from a battery with a capacity of 4 kilowatt hours or more or be a two- or three-wheeled vehicle propelled by an electric motor that draws electricity from a battery with the capacity of 2.5 kilowatt hours. A taxpayer may not claim this credit if the plug-in electric drive vehicle credit is allowable.
• Conversion Kits Tax Credit: The new law also provided a tax credit for plug-in electric drive conversion kits. The credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle and placed in service after Feb. 17, 2009. The maximum amount of the credit is $4,000. The credit does not apply to conversions made after Dec. 31, 2011. A taxpayer may claim this credit even if the taxpayer claimed a hybrid vehicle credit for the same vehicle in an earlier year.
• Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT: Starting in 2009, the new law allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Other Energy Efficient Tax Credits Available For Home Improvements

There is also a energy efficient home tax credit that people can take advantage of.  From the IRS:

• Residential Energy Property Credit: There is an energy tax credit for homeowners who make energy efficient improvements to their existing homes. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 for improvements placed in service in 2009 and 2010.
• Residential Energy Efficient Property Credit: This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30 percent of the cost of qualified property.

For more details on this tax credit, go to our article on the topic:  home improvement tax credit

Did you buy an energy efficient vehicle this year? Do you plan to take advantage of the electric vehicle tax credits or home energy efficiency tax credits? Do you think these tax credits are unnecessary?  Give us your take in the comments!