The just completed Congressional exercise to create some sort of tax reform has good news in it for the plug-in electric vehicle industry and consumers looking to purchase an EV in 2018. The highly touted and still marketing necessary “up to” $7,500 federal tax credit for purchase of EV vehicles survives in the final version of the legislation just approved.
Until a week ago or so, it looked like the plug-in electric vehicle income-tax credit program was dead. Without going into the partisan politics of the energy and environment issues, it had been omitted from the House version of the Congressional Tax legislation, but was included in the Senate draft version. Due to some intense lobbying from multiple sources including manufacturers and suppliers who have invested heavily – creating over 200,000 new jobs related to the technology – to bring new product to market in 2018, the tax credit will now continue.
So, for those consumers looking for an EV for the fuel economy or more altruistic environmental reasons, 2018 remains a good year to consider the options out there and get the savings while the opportunity lasts.
But, given that the new tax laws and their impact on business and consumers are still to be quantified, we strongly suggest a careful and measured approach and analysis by consumers in considering an EV purchase and getting a tax credit.
Following are some tips that may be useful.
Getting the Tax Credit
The federal Internal Revenue Service (IRS) tax credit available for qualifying EV (plug-in electric vehicles) runs from $2,500 up to $7,500. The size of the tax credit depends on the size of the vehicle and its battery capacity.
The credit is only available for electric vehicles that can be charged from an external source (plug-in) including those hybrids with a plug-in source. Hybrids that are not a plug-in do not qualify. The vehicle must be new from the factory and be licensed/used in the United States. The credit goes to the top name on the title meaning you must purchase it. The credit on a leased vehicle will go to the leasing owner.
The tax credit must be claimed in the year you put the vehicle in service. Importantly, you can only claim a tax credit available for the vehicle/powertrain combination you are purchasing – up to the amount of net Federal tax you will owe the IRS for the year. In other words, if you owe $3,000 in federal taxes and buy say a Ford Fusion Energi with an available credit of $4,007, you can only claim the $3,000.
Professional Tax Guidance Recommended
If you are in the market for a qualifying EV in 2018 and want to consider using the tax credit, we strongly advise you contact your tax person for some guidance before making a purchase decision. The new (and hastily) passed tax legislation has a number of unknowns – or what we will call ‘unsure’ elements in it that may affect the amount of credit you can claim based on your ‘expected’ net tax liability for 2018. You (or your tax professional) need to calculate or recalculate your position as it certainly will be different than it was in 2017.
Since you asked, IRS Form 8936 ( www.irs.gov/form8936 ) contains instructions and the proper document to submit your claim for tax credit if you do your own taxes.
Bear in mind also, that there are some state and local incentives that may still apply to vehicles depending on the state you live in. Check also to see what tax credits (from local to federal) may apply if you install specialized EV charging equipment in your home.
Make sure you check those out as they can add to the savings.
Important to know – Not Critical Yet
The electric vehicle tax credit program has unit limits as established in the program. Each manufacturer is ‘allotted’ up to 200,000 qualified vehicles to be sold and delivered during the life of the program before it begins an expiry protocol for that brand. Currently, no manufacturer is close to that limit, but a couple – Nissan and General Motors – are now over 100,000 vehicles delivered. Depending on the success of new and improved products scheduled for 2018 and 2019, they could limit out approaching 2020.
Tesla is of more concern in that they have orders and/or deposits on hand for qualifying vehicles that exceed the 200,000-unit limit. Given their production problems, it may be some time before they actually deliver that level and exit the program. Our advice, if you are a Tesla buyer, is to be aware that – at the time of delivery – the credit you expected may have expired for Tesla otherwise qualifying vehicles.
You can learn more about the program and check the federal tax credit that is available for a vehicle you may be considering purchasing by going here: http://www.fueleconomy.gov/feg/taxevb.shtml