Buying an electric vehicle (EV) or hybrid plugin electric vehicle (PEV) can be an earth friendly thing to do. Plug In Hybrids burn less fuel, so they emit fewer emissions. And fully electric vehicles burn no fuel at all, making them greener than a freshly cut Christmas tree, made of money, sitting in the middle of a sod farm. But both types of vehicles can be pretty tax-friendly too.
Provided the manufacturer hasn’t reached the cap of 200,000 units sold, you probably still qualify for the $7,500 Federal Electric Vehicle Tax Credit, or the $7,500 Plug In Hybrid Tax Credit. However, this isn’t a refund, and you’ll never get any money back.
This incentive is designed to work by reducing your income tax bill for the year that you buy the car. If you owed Uncle Sam $8,000 in federal taxes that year, the bill would drop to $500, provided you bought a qualified EV or plug-in hybrid. If you only owed $4,500, then your tax bill would drop to $0. If you didn’t owe any income taxes that year, you wouldn’t see any benefit from the EV tax credit, or the plug-in tax credit. This credit will never cause a refund.
Regular hybrids no longer qualify for a tax credit. Just EVs and plug in hybrids with a ‘traction battery’ capable of at least 4 kWh of power. The vehicle must have an external charging plug, and a gross vehicle weight rating of up to 14,000 lbs. With the smallest 4 kWh battery size, you will only get you the minimum credit of $2,500. However, the larger the battery capacity, the larger the tax credit (capped at $7,500 for individuals). These tax incentives will expire as soon as the vehicle manufacturer sells 200,000 copies of that particular EV or plug in hybrid.
Depending on the state that you live in, the cost of the EV home charging station can be refunded to you in the form of a mail-in rebate, a state grant, a state tax credit, or a free home charger program. You may also qualify for additional incentives from your local utility. Like the Long Island Power Authority’s $500 rebate for purchasing a qualifying EV or plug-in hybrid (expires 12/31/2012).
Other state-specific EV / PEV perks include title tax exemptions, reduced tag / registration fees, emissions testing exemptions, and access to the state’s High Occupancy Vehicle (HOV) lanes. To see the incentives available in your state, you can visit the Department of Energy’s state-by-state list.
Hyrids and EVs have always been popular with upper-income customers. Partly because they can afford the higher sticker price. And partly because of the tax advantages. But you need to do some homework before you decide to buy one. That way you can understand all of the financial implications that an EV / PEV will have on your bottom line.