25.20 Credits for Fuel Cell Vehicles and Plug-in Electric Vehicles

You can claim a credit for a qualified fuel cell vehicle on Form 8910. A credit for qualified plug-in electric drive motor vehicles can be claimed on Form 8936.

Expired credits.

There is no longer a tax credit for hybrid vehicles, alternative fuel or advanced lean-burn technology vehicles; the credit was allowed only for vehicles purchased before 2011. The credit for plug-in electric vehicle conversions expired for conversions made after 2011.

The credit for two- or three-wheel rechargeable electric vehicles and four-wheel “low-speed” vehicles also expired for vehicles acquired after 2011, but proposals have been made to extend the credit for qualifying two- or three-wheel vehicles; see the e-Supplement at jklasser.com for an update.

Credit for fuel cell vehicles on Form 8910.

The credit applies to vehicles that use cells to produce electricity by combining oxygen with hydrogen fuel and that meet certain additional requirements. The IRS acknowledges certifications made by vehicle manufacturers that certain models qualify for the credit. The IRS acknowledgment allows the manufacturers to certify to consumers that these models qualify for a credit equal to the certified amount. You may generally rely on the manufacturer’s certification that the specified credit amount is allowable. See the instructions to Form 8910 for a list of qualifying models and the allowable credit amounts for 2012.

You must be the original purchaser of a new qualifying vehicle to claim the credit. A credit is not allowed for a used vehicle. If you lease a qualifying vehicle, only the leasing company (and not you) may claim the credit. The vehicle must be used predominantly within the United States.

The credit for personal use of a qualified fuel cell vehicle is subject to a tax liability limit on Form 8910. The credit is limited to your regular tax plus AMT liability, minus various nonrefundable personal credits.

If the vehicle is used for business, the credit for business use figured on Form 8910 is entered on Form 3800 as part of the general business credit (40.26).

Qualified plug-in electric drive motor vehicle credit on Form 8936 (Section 30 D credit).

A qualifying vehicle placed in service in 2012 must have at least 4 wheels and be propelled to a significant extent by a rechargeable battery that has a capacity of at least 4 kilowatt hours. Only vehicles with a gross vehicle weight rating of less than 14,000 pounds qualify for the credit. The minimum credit is $2,500, and depending on battery capacity the credit is increased, up to a maximum credit of $7,500.

The personal use portion of the credit on Form 8936 is limited to tax liability (regular tax plus AMT) reduced by various nonrefundable personal credits. If the vehicle is used for business, the credit for business use figured on Form 8936 is entered on Form 3800 as part of the general business credit (40.26).

The credit will be subject to a phaseout rule in future years if the market for these vehicles expands. The credit for a manufacturer’s vehicles will begin to phase out starting in the second calendar quarter following the quarter in which the 200,000th qualifying vehicle is sold in the U.S. since the end of 2009.

Note: A proposal was made in Congress to restore the expired credit for electric motorcycles and qualifying three-wheel electric vehicles and to combine it with the Section 30 D credit; see the e-Supplement at jklasser.com for an update on the proposal.