Plug-In Electric Drive Vehicle Federal Tax Credit (IRC 30D)

Program Name: Plug-In Electric Drive Vehicle Federal Tax Credit (IRC 30D)
Program Sponsor: IRS (Federal)
Program Type:          Tax Credit
Technology:         Electric Vehicles (EV)
Fuel:              Electric
Eligibility:  Businesses

Description

Internal Revenue Code Section 30D provides a credit for Qualified Plug-In Electric Drive Motor Vehicles including passenger vehicles and light trucks.

Eligibility

The credit is available for vehicles acquired after December 31, 2009 and the vehicle must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used in the United States. For purposes of the 30D credit, a vehicle is not considered acquired until title to the vehicle passes to the taxpayer under state law.

If the EV is being leased, the tax credit goes to the manufacturer offering the lease. The manufacturer will likely factor the credit into the cost of the lease to lower the monthly payments. However, it is not mandatory for the manufacturer to do so.

How it Works

The credit is equal to $2,500 plus, for vehicles that draw propulsion energy from a battery with at least 5 kilowatt hours of capacity, an additional $417, as well as an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The EV credit is nonrefundable and will only offset the claimant’s tax liability for a given tax year, meaning the credit cannot exceed the amount the claimant owes in taxes.

For businesses, the tax credit attributable to depreciable property (vehicles used for business or investment purposes) is treated as part of the general business credit. The general business credit can be carried back one year or carried forward for up to 20 years. Any credit not attributable to depreciable property is treated as a personal credit.

The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States. Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period.  Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period. At present, Tesla and General Motors are the only two EV manufacturers to hit the sales threshold and no credit will be available for Tesla vehicles acquired after December 31, 2019 and General Motors vehicles acquired after March 31, 2020.

A list of qualified make and models, and their applicable credit amounts are available here.

How to Apply

The tax credit is claimed when the taxpayer files their federal tax return. The specific IRS form for the credit is the Qualified Plug-In Electric Drive Motor Vehicle Credit Form 8936.

When filling out Form 8936, taxpayers can rely on the domestic manufacturer’s (or, in the case of a foreign manufacturer, its domestic distributor’s) certification that a particular make, model, and year of the vehicle qualifies as a plug-in electric drive motor vehicle under section 30D, and certification of the amount of the credit allowable with respect to the vehicle.

Instructions for filling out Form 8936 are also available.

For more information, refer to the official IRS Plug-In Electric Drive Vehicle Credit webpage.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040.