Qualified Electric Vehicle

A qualified electric vehicle is a vehicle that allows the owner to claim a nonrefundable tax credit after purchase. A qualified electric vehicle must have at least four wheels and be designed for use in public. It must also be powered primarily by an electric motor that draws its charge from rechargable batteries or fuel cells. The vehicle must be driven almost exclusively in the U.S. 

A qualified electric vehicle credit can be found via Internal Revenue Code Section 30D. To receive the credit, the vehicles must be acquired for use or lease; the credit is not available for resale. In addition, the original use of the vehicle must begin with the taxpayer who uses the vehicle predominantly in the U.S. 

The form for the credit, Form 8936, has three parts. Part I calculates the tentative credit amount, which the manufacturer will likely provide with the vehicle's certification. The remaining two parts of the form allocate the credit between an individual’s business in Part II and personal use of the vehicle in Part III. For vehicles acquired after December 31, 2009, the total credit available is $7,500. Broken down, an individual can receive $2,500. For a vehicle that draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, individuals may receive an additional $417, plus another $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. 

Section 30D originated from The Energy Improvement and Extension Act of 2008. The American Recovery and Reinvestment Act of 2009 modified Section 30D for vehicles acquired after December 31, 2009. The American Taxpayer Relief Act (ATRA) for specific two- or three-wheeled vehicles acquired after December 31, 2011 and before January 1, 2014 modified Section 30D as well.

The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over 12 months starting with the second calendar quarter after the calendar quarter in which at least 200,000 qualified electric vehicles manufactured by that manufacturer are sold for use in the U.S. Vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if bought in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarters of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.