When Do Electric-Car Tax Credits Expire?
2012 Toyota Prius Plug-In Hybrid - production model
By now, pretty much anyone who's thinking of buying a plug-in electric car knows the Federal government offers an income-tax credit to help reduce the effective cost.
But are shoppers who wait too long in danger of losing out on these credits?
The short answer is no. Or at least, not if they buy within the next two or three years.
Unlike a purchase rebate. which is basically a check in the mail, an income-tax credit is taken when the buyer files his or her U.S. income tax return for the year in which the electric car was purchased.
Credits range from $2,500 to $7,500 for battery-electric and plug-in hybrid passenger cars, based on the size of the battery pack.
The minimum pack size is 4 kilowatt-hours, and the scale runs from 4 kWh to 16 kWh (or more). For example:
- Toyota Prius Plug-In Hybrid: $2,500
- Ford Fusion Energi & C-Max Energi: $3,750
- Chevrolet Volt, Nissan Leaf, Tesla Model S, others: $7,500
2013 Nissan Leaf, Nashville area test drive, April 2013
Like the prior program of income-tax credits for purchase of a hybrid-electric car, which ended several years ago, there's a cap on how many cars from each maker qualify for the credits.
But whereas hybrids were capped at 60,000 vehicles per carmaker, plug-in vehicles have a higher cap: 200,000 cars per manufacturer.
That applies to sales in the United States only, and once that number is achieved, the credits start to phase out over a one-year period starting in the second quarter
after that total is reached.
For two quarters, the credit is halved; for a third quarter, it is set at 25 percent of the original amount.
And then, it's done.
The relevant rules can be found on the IRS website. including the phaseout:
The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”).
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 and25 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.
2011 Chevrolet Volt and 2013 Tesla Model S [photo: David Noland]
In practice, General Motors is closest to the limit; as of June 30, it had sold 41,313 Volts in the U.S.
Nissan is next, with 29,351 Leafs sold, and then there's Toyota, at just under 17,000 Prius Plug-Ins delivered.
Tesla comes fourth, at an estimated 12,000 Model S electric sport sedans sold, but every other maker is below 10,000 plug-in electric cars delivered.
This year, the number will roughly double again.
But you still have some time before any maker starts to get close to that 200,000 total--so you can safely keep shopping.