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Phaseout for Plug-In Electric Drive Vehicle Credit to Begin for Second Manufacturer

The Time to go Green is Now
Phaseout for Plug-In Electric Drive Vehicle Credit to Begin for Second Manufacturer

According to Internal Revenue Code Section 30D, a maximum credit of $7,500 is provided for any Qualified Plug-in Electronic Drive Motor Vehicle.  For purposes of this credit, a qualified vehicle must meet the following two requirements:

  1. A new vehicle that is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity.
  2. Has a gross vehicle weight of less than 14,000 pounds.

This credit was first enacted in the Energy Improvement and Extension Act of 2008 and was modified by later laws such as the American Recovery and Reinvestment Act of 2009 and the American Taxpayer Relief Act of 2013.  It applies to vehicles acquired after December 31, 2009 and purchased for use or lease and not for resale.  However, a phaseout of the credit has recently been triggered.

The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer's vehicles once the manufacturer has sold 200,000 qualifying vehicles for use in the United States.  The phaseout begins in the second calendar quarter after the calendar quarter in which the sales number (200,000 vehicles) has been achieved.  Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phaseout period and 25 percent of the credit if acquired in the third or fourth quarter of the phaseout period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phaseout period.      

The Internal Revenue Service Announced on March 26, 2019 that General Motors, LLC has sold more than 200,000 vehicles eligible for the credit, thus enacting the phaseout for all GM qualified vehicles.  General Motors joins Tesla as the only two manufacturers who have reached the necessary sales figure to trigger the credit phaseout for their vehicles.  The following table provides an outline of the applicable amount of the credit you can take for each manufacturer:

Tesla

Applicable Credit Amount

 

General Motors

Applicable Credit Amount

Purchased before January 1, 2019

100%

 

Purchased before April 1, 2019

100%

Purchased after December 31, 2018 but before July 1, 2019

50%

 

Purchased after March 31, 2019 but before October 1, 2019

50%

Purchased after June 30, 2019 but before January 1, 2020

25%

 

Purchased after September 30, 2019 but before April 1, 2020

25%

Purchased after December 31, 2019

0%

 

Purchased after March 31, 2020

0%

For more information regarding the Plug-in Electric Vehicle Drive Credit and to view a list of other car manufacturer's qualified sales, visit https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d.  

For more information, please contact a member of the Herbein tax team, or email us at info@herbein.com.

Article prepared by Richard M. Staniszewski