2016 Electric Car Tax Incentives: The Shocking Truth | Autobytel.com

Electric Vehicle tax Incentives

Vehicles / May 16, 2015

General Motors has already sold about 100, 000 credit-eligible vehicles, so prospective Bolt owners might want to act fast if that $7, 500 tax credit is a deal-breaker.


Automakers releasing electric vehicles like to talk about "post-incentive" pricing. After all, who wouldn't jump at the chance to knock up to $7, 500 off a car's price? The US government offers a tax credit worth up to $7, 500 when you buy an EV, but as with all things tax-related, the incentive is more complicated than it may seem. You may not save any money at all, never mind the full $7, 500.

The government's incentive is designed to help spur production of alternative-energy vehicles. It's important to note that it isn't a point-of-sale deduction on the car's window sticker, but rather a dollar-for-dollar reduction of your income tax liability. So you won't technically save $7, 500 on the vehicle's price, but rather save $7, 500 on your taxes.

In fact, your vehicle might not even be eligible for the full credit. The credit applies to any vehicle with a battery larger than 5 kWh. You'll get $417 credit for that initial 5 kWh, plus an additional $417 for each kilowatt-hour above that. Tesla's 90-kWh battery would have been eligible for a $35, 862 credit under this system, so the IRS capped it at $7, 500. Since the threshold for battery capacity is so low, some plug-in hybrids are eligible for the credit, as well.

Now let's talk about limitations on this credit, because they won't last forever. Automakers can give out 200, 000 full ($7, 500) tax credits each, and a phase-out process begins once that number is reached. The IRS cuts the credit in half ($3, 750) for the following two fiscal quarters, then halves it again ($1, 875) for two more quarters. After a full fiscal year of phase-out, the credit disappears.

Source: www.cnet.com