Tax Breaks for Buying a Car! Who knew?
Are you in the market for a new car? Is that jalopy you are driving giving you pause as to whether or not it will make it through another winter? There is good news, if you are in the market for a new car there are provisions now that allow you to purchase a car and get a tax break. Below are details about the program and how it works. I will even give you a resource for a comprehensive list of makes and models with the qualifying tax breaks.
Each of us has heard time and again that the environment is suffering from the output of emissions from our motor vehicles. The IRS has a great program for helping those environmentally conscious to claim deductions on their taxes if they choose to purchase an electric car. The Qualified Plug-In Electric Drive Motor Vehicle Credit, as it is called, can save taxpayers money. The credit is based on a flat rate of $2,500 plus an additional deduction depending on the capacity of the battery used to provide propulsion energy not to exceed $5,000 bringing the total deduction to $7,500.
How can a consumer qualify for this deduction? Simply ensure that the vehicle being replaced, the aforementioned jalopy, meets the following requirements:
- The motor vehicle with four wheels must be manufactured primarily for use on public streets, roads, and highways. Sorry guys, golf carts do not count.
- It must be treated as a motor vehicle for purposes of Title II of the Clean Air Act. This will bar certain low speed motor vehicles from the credit.
- There is a weight limit. The vehicle must be below 14,000 pounds GVWR (gross vehicle weight rating).
- The vehicle must be propelled to a significant extent by an electric motor drawing from a battery with a minimum of 4 kilowatt hours and rechargeable from an external source. In other words, that it has to be able to run for 4 hours, draw power from the storage battery of energy, and it have the ability to be plugged up.
- You have to use the vehicle predominantly in the United States. Buying one for the second home in the Caribbean will not qualify for the tax break.
- The purchase must be for a new car (original owner).
Head out to the dealership and start looking for that new ride. However, there is a cap on this deduction. Once the number of electric cars hits the 200,000 mark sold in the United States; the IRS will begin a phase out of the deduction. This of course, being when they are sold for usage in the United States. Hurry to the dealership and start looking for the new ride and take advantage of the additional tax credit now available when replacing that car you have been debating ‘fixing’ to last one more season.
For additional information and a list of qualifying vehicles, go to: https://www.irs.gov/businesses/qualified-vehicles-acquired-after-12-31-2009
Article by: Derek T. Wright, Staff Accountant