How to Get a Tax Credit for Vehiclesby Contributing WriterUpdated June 12, 2017
If you are considering the purchase of an Vehicles be sure to take full advantage of federal tax incentives that may be available to buyers of Vehicles that run primarily on Vehicles. Depending on the type of Vehicles you invest in, it is possible to take advantage of multiple tax credits on a single transaction. In addition to federal tax credits, some states might have their own separate tax credits Vehicles. When you consider the savings from using federal and state tax credits along with the potential savings on gas, buying an Vehicles may become a more viable option.
Under The Hood:
- How to Get a Tax Credit for a Hybrid Car
- How to Get Tax Credit for Electric Vehicles
- How to Get a Tax Credit for an Energy Efficient Car
Understand that hybrid car tax credits are based on the estimated fuel economy that is calculated by the Fuel Economy credit on fuel usage for weight and a Conservation credit on fuel effectiveness. The more economical a hybrid is, the greater the tax credit.
Move quickly because manufacturers of hybrids can sell 60,000 hybrid vehicles at the full credit, after that the amount is gradually phased out. This means that you can expect the more popular cars like the Toyota Prius to be the first hybrids without a tax credit.
Explore other hybrid vehicles if the one you want no longer qualifies for a tax credit. You'll find more than 40 hybrid models on the marketplace.
Go to the Internal Revenue Service website at IRS.gov and search for "qualified hybrid vehicles." This regularly updated newsroom information tells you what cars qualify and for how much.
Get busy because federal tax credits for hybrid cars expire in 2010.
Learn whether you are subject to the Alternative Minimum Tax. If so, you can't take the credit.
Check with your state tax bureau about hybrid car incentives. States like Colorado also offer state tax credits for purchasing a hybrid car.
Ask the electric car dealer to provide you with tax credit eligibility information on the vehicle you are purchasing. This information will help you complete tax forms later on and update you on any recent revisions or additions to existing tax credits.
Purchase a new electric vehicle. When you have decided on a vehicle, keep in mind that you will get the greatest amount of the current federal tax credit for vehicles with larger battery capacities. As of 2010, any vehicle with over 4 kilowatt-hours of battery capacity is eligible for a $7,500 credit.
Claim the Electric Drive Vehicle Credit by filling out Form 8936 and attaching it to your federal tax return for the year purchased. The IRS currently lists two electric models that qualify for the full $7,500 credit. This list will expand as more electric vehicles are released.
Use the Plug-In Electric Vehicle Credit when purchasing smaller, low-speed electric vehicles. These types are often referred to as neighborhood electric vehicles. You can claim up to $2,500 for these vehicles by filling out Form 8834 and attaching it to your federal tax return.
Use the conversion tax credit. If you convert your hybrid vehicle into a fully electric plug-in vehicle, you are eligible to receive 10 percent of the conversion costs up to $4,000. The conversion credit was set to be phased out by 2012, however.
Take advantage of state tax credits. If you reside in California, the Clean Vehicle Rebate Project allows to you to get up to $5,000 for light-duty electric vehicles and up to $20,000 for zero-emission commercial vehicles. But not all states are as generous. To find out if your state offers tax credits towards electric vehicles, visit The Car Electric website (see References), which provides current benefits available in various states.
Items you will need
Tax Form 8936
Tax Form 8834
Buy a plug-in hybrid electric car or truck. A new federal tax credit will be put in place in 2009 that covers plug-in hybrid electric cars and trucks. The tax credit amounts range from $2500 - $7500. The first 250,000 plug-in hybrid vehicles sold will get the full tax credit, and then it will be phased out like earlier tax credits.
Claim a credit on most other fuel efficient vehicles bought in the past few years. Tax credits are still available for hybrid gasoline-electric, diesel, battery-electric, alternative fuel, and fuel cell vehicles. These credits cover cars from 2006 onward.
Buy before the manufacturers reach their quotas. Tax credits for hybrid and diesel vehicles will end in 2010, but will be phased out early for each manufacturer that sells 60,000 eligible vehicles.
For details on applying for these credits, see the Resources section below for links to the IRS website and the Energy Star website.