Requirements and Facts You Need To Claim Plug-In Electric Drive Vehicle Tax Credit

Requirements and Facts You Need To Claim Plug-In Electric Drive Vehicle Tax Credit

If you buy a new vehicle or car that gets its electricity drawn from a plug-in rechargeable battery, you may be qualified to claim the plug-in electric drive vehicle tax credit. This could help in reducing your tax bill. To get this credit, you must ensure you file IRS Form 8936 with your return and meet some requirements.

Your vehicle must meet some requirement to be eligible for the plug-in electric drive vehicle. First, only eligible cars which are purchased after 31st December 2009 qualify for the credit.  Your plug-in electric vehicle must as well be new and produced by an eligible producer under the Clean Air Act. The vehicle must have at least four wheels, be fit for driving on public highways and streets, and have a weight rating lower than 14,000 pounds. The most important is that the vehicle must have an eligible motor that makes use of a rechargeable battery as a source of minimum 4-kilowatt hours of capacity.

Certification and Other Requirement To Be Eligible

In case you buy a vehicle, and its certification was revoked on or after the date you purchased it, you can depend on such certification though you have not placed the car in service or gotten the credit by the date the IRS published its withdrawal announcement.

The IRS will make no move to collect any understatement tax liability attributable to dependence on the certification as long as the vehicle was bought on or before the date the IRS published the withdrawal announcement.

The following requirement must be reached to be eligible for the credit.

1. You are the one who owns the vehicle. If the car is on the lease, only the lessor and not the lessee is qualified to access the credit.

2. The vehicle must be positioned in service during your tax year.

3. Your vehicle is produced primarily for public streets, roads and highway use.

4. The first use of the vehicle started with you.

5. The vehicle was bought for personal use or to be leased and not for a resale.

6. The vehicle is used solely in the United States of America.

Manufacturer's certification

The producer of your qualified plug-in vehicle will give you a certification that your motor vehicle qualifies for the credit. The vehicle producer's certification will include information on the make, model, and year of your vehicle and which type of credit amount your vehicle is qualified for.

Note that if the IRS publishes an official statement that certain vehicles are no longer qualified for the credit, you cannot reply on successive certifications by the producers of those vehicles. The credit can also phase out for some particular producers once they sell above 200,000 of their plug-in electric vehicles. The IRS, however, posts periodically a list of producers that are eligible and the production numbers for the qualifying models on their website.

Form 8936 credit calculation

This form has three parts. Part one calculates your tentative credit amount, which in most cases; the producer will have been made available with its certification. If the vehicle meets up with the minimum requirements, the credit begins at $2,500 and extended to a maximum of $7,500.

After the calculation of your credit in the first part of Form 8936 is done, the other two parts share the credit between your business in the second part and personal use of the vehicle in the third part.

Tentative Credit Reduction

 As a tax credit, your tax bill on dollar for dollar basis is reduced by the amount of your qualified plug-in electric drive tax credit.

You may not see you take the full tax saving of the tentative credit you calculate on form 8936 based on your liability and other tax credit. This is because the credit is a nonrefundable credit. Nonrefundable tax credits are not able to reduce your tax bill for some other credits gotten before the reduction of the remaining tax bill for your plug-in electric motor vehicle credit. 

You can engage the service of a tax preparer or accountant to be rightly guided on how to access Plug-In Electric Drive Vehicle Tax Credit.