Consumer Energy Tax Incentives
What the American Recovery and Reinvestment Act Means
to You
The American Recovery and Reinvestment Act of 2009
extended many consumer tax incentives originally introduced in the
Energy Policy Act of 2005 (EPACT) and amended in the Emergency
Economic Stabilization Act of 2008 (P.L. 110-343).
See the summary of the energy tax incentives included
in the
Emergency Economic Stabilization Act of 2008.
ABOUT TAX CREDITS
A tax credit is generally more valuable than an equivalent tax
deduction because a tax credit reduces tax dollar-for-dollar, while a
deduction only removes a percentage of the tax that is owed. Consumers
can itemize purchases on their federal income tax form, which will
lower the total amount of tax they owe the government.
Fuel-efficient vehicles and energy-efficient
appliances and products provide many benefits such as better gas
mileage -meaning lower gasoline costs, fewer emissions, lower energy
bills, increased indoor comfort, and reduced air pollution.
In addition to federal tax incentives, some consumers
will also be eligible for utility or state rebates, as well as state
tax incentives for energy-efficient homes, vehicles and equipment.
Each state's energy office web site may have more information on
specific state tax information.
Below is a summary of many of the tax credits
available to consumers. Please see the ENERGY STARŪ page on
Federal Tax Credits for Energy Efficiency for more details on
federal incentives and the
Database of State Incentives for Renewables and Efficiency (DSIRE)
for information on federal, state, local, and utility incentives.
AUTOMOBILE TAX CREDITS
Hybrid Gas-Electric and Alternative Fuel Vehicles
Individuals and businesses who buy or lease a new hybrid
gas-electric car or truck are eligible for an income tax credit for
vehicles "placed in service" starting January 1, 2006, and purchased
on or before December 31, 2010. The amount of the credit depends on
the fuel economy, the weight of the vehicle, and whether the tax
credit has been or is being phased out. Hybrid vehicles that use less
gasoline than the average vehicle of similar weight and that meet an
emissions standard qualify for the credit.
This tax credit will be phased out for each
manufacturer once that company has sold 60,000 eligible vehicles. At
that point, the tax credit for each company's vehicles will be
gradually reduced over the course 15 months. See the IRS's
Summary of the Credit for Qualified Hybrid Vehicles for
information on the status of specific vehicle eligibility.
Alternative-fuel vehicles, diesel vehicles with
advanced lean-burn technologies, and fuel-cell vehicles are also
eligible for tax credits. See the IRS summary of credits available for
Alternative Motor Vehicles.
Plug-In Electric Vehicles
The Recovery Act modifies the credit for qualified plug-in
electric drive vehicles purchased after Dec. 31, 2009. The minimum
amount of the credit for qualified plug-in electric drive vehicles is
$2,500 and the credit tops out at $7,500, depending on the battery
capacity. To qualify, vehicles must be newly purchased, have four or
more wheels, have a gross vehicle weight rating of less than 14,000
lbs, and draw propulsion using a battery with at least four kilowatt
hours that can be recharged from an external source of electricity.
The full amount of the credit will be reduced with respect to a
manufacturer's vehicles after the manufacturer has sold at least
200,000 vehicles. The credit will then phase out over a year.
Please see IRS Notices
2009-54: Qualified Plug-in Electric Vehicle Credit (PDF 29kb) and
2009-58: Qualified Plug-In Electric Vehicle Credit Under Section 30
(PDF 19kb) for more information (requires
Adobe Acrobat Reader).
Plug-In Hybrid Conversion Kits
The Recovery Act also provided a tax credit for plug-in electric
drive conversion kits. The credit is equal to 10% of the cost of
converting a vehicle to a qualified plug-in electric drive motor
vehicle and placed in service after Feb. 17, 2009. The maximum amount
of the credit is $4,000. The credit does not apply to conversions made
after Dec. 31, 2011. A taxpayer may claim this credit even if the
taxpayer claimed a hybrid vehicle credit for the same vehicle in an
earlier year.
Please see the IRS website for more information on
Alternative Motor Vehicle Credits.
Low Speed & 2/3 Wheeled Vehicles
The Recovery Act law also creates a special tax credit for two
types of plug-in vehicles - certain low-speed electric vehicles and 2-
or 3-wheeled vehicles. The amount of the credit is 10% of the cost of
the vehicle, up to a maximum credit of $2,500 for purchases made after
Feb. 17, 2009, and before Jan. 1, 2012.
To qualify, a vehicle must be either a low speed
vehicle propelled by an electric motor that draws electricity from a
battery with a capacity of 4 kilowatt hours or more or be a 2- or
3-wheeled vehicle propelled by an electric motor that draws
electricity from a battery with the capacity of 2.5 kilowatt hours. A
taxpayer may not claim this credit if the plug-in electric drive
vehicle credit is allowable. |
