Alternative Motor Vehicle Credit

The alternative motor vehicle credit is a tax credit given to individuals who purchase vehicles that derive their power from alternative energy sources. Taxpayers are eligible to receive this nonrefundable alternative motor vehicle tax credit if they are the original purchasers of a vehicle after January 1, 2006. The vehicle must also qualify, and the resulting tax credit will vary depending on the model. The alternative motor vehicle credit is a type of miscellaneous tax credit.

The alternative motor vehicle credit is designed to encourage the purchase and use of alternative fuel vehicles. The tax credit is claimed on Internal Revenue Service (IRS) Form 8910, Alternative Motor Vehicle Credit, and is credited to the taxpayer after all other nonrefundable credits have been subtracted from the taxpayer's tax liability. The alternative motor vehicle credit is one of several specialty tax credits in the category of miscellaneous tax credits that are designed to encourage certain behaviors.

A vehicle qualifies for the alternative motor vehicle credit if it has at least four wheels and qualifies as a qualified fuel cell vehicle. IRS instructions state that a qualified fuel cell vehicle is a “new vehicle propelled by power derived from one or more cells that convert chemical energy directly into electricity by combining oxygen with hydrogen fuel, and that meets certain additional requirements.” The vehicle may need to be certified by the manufacturer that it meets certain standards to qualify for the tax credit. The manufacturer or distributor of the vehicle can provide the taxpayer with a letter of certification for the IRS for purposes of claiming the alternative motor vehicle credit.

In addition to the requirements pertaining to the vehicle, the taxpayer must fulfill a set of requirements to claim the credit. The taxpayer must be the owner of the vehicle, not leasing the vehicle, and must put it into service in the year the credit is claimed. The taxpayer must be the first owner and user of the vehicle and must have purchased it to use or to lease to others, not to resell. The taxpayer must use the vehicle primarily in the United States.

Taxpayers file IRS Form 8910, Alternative Motor Vehicle Credit to calculate and claim the credit. If the purchased vehicle is a depreciable asset for a business, it is filed as a general business credit and attached to IRS Form 3880, General Business Credit. If the purchased vehicle is not a depreciable asset, it is filed as a personal tax credit attached to IRS Schedule 1040.