Electric Vehicle Credit
You can choose to claim a tax credit for a qualified electric vehicle
you place in service during the year. You can make this choice regardless of
whether the property is used in a trade or business.
Qualified Electric Vehicle
A vehicle is a qualified electric vehicle if it meets all the
following requirements.
- It is a motor vehicle (defined earlier) powered primarily by an electric motor drawing
current from rechargeable batteries, fuel cells, or other portable sources of electrical
current.
- You were the first person to use it.
- You acquired it for your own use and not for resale.
- It has never been used as a nonelectric vehicle.
- It is not nonqualifying property, defined earlier.
Amount of the Credit
The credit is generally 10% of the cost of each qualified electric vehicle you place in
service during the year. If your vehicle is a depreciable business asset, you must reduce
the cost of the vehicle by any section 179 deduction before figuring the 10% credit. If
you need information on the section 179 deduction, see Publication 946.
Credit limits. The credit is limited to $4,000 for each vehicle. The
total credit is limited to the excess of your regular tax liability, reduced by certain
credits, over your tentative minimum tax. To figure the credit limit, complete Form 8834
and attach it to your tax return.
How To
Claim the Credit
You must complete and attach Form 8834 to your tax return to claim the electric vehicle credit.
Enter your credit on your tax return as discussed next.
Individuals. Individuals claim the credit by entering the amount
from line 20 of Form 8834 on line 53 of Form 1040. Check box d and specify Form
8834.
Partnerships. Partnerships enter the amount from line 20 of Form
8834 on line 13 of Schedule K (Form 1065). The partnership then allocates the credit to
the partners on line 13 of Schedule K-1 (Form 1065). See the instructions for Form 1065.
S corporations. S corporations enter the amount from line 20 of Form
8834 on line 13 of Schedule K (Form 1120S). The S corporation then allocates the credit to
the shareholders on line 13 of Schedule K-1 (Form 1120S). See the instructions for Form
1120S.
C corporations. C corporations claim the credit by entering the
amount from line 20 of Form 8834 in the total for line 6c of Schedule J (Form 1120),
checking the Other box and entering 8834 in the space provided. See the
instructions for Form 1120.
Recapture of the Credit
The electric vehicle credit is subject to recapture if, within 3
years after the date you place the vehicle in service, it ceases to qualify for the
electric vehicle credit. You recapture the credit by adding it, or part of it, to your
income tax for the year in which the recapture event occurs.
The vehicle will cease to qualify if it is changed in either of the following ways.
- It is modified so that it is no longer primarily powered by electricity.
- It becomes nonqualifying property, defined earlier.
Sales or other dispositions. If you sell or otherwise dispose of the
vehicle within 3 years after the date you placed it in service and know or have reason to
know that it will be changed in either of the ways described above, you are subject to the
recapture rules. In other dispositions (including a disposition by reason of an accident
or other casualty), the recapture rules do not apply.
If the vehicle was subject to depreciation, the credit (minus any recapture amount) is
considered depreciation when figuring the part of any gain from the disposition that is
ordinary income. See Publication 544 for more information on dispositions of depreciable
property.
Recapture amount. Figure your recapture amount by multiplying the
credit by the following percentage.
- 100% if the recapture date is within the first full year after the date the vehicle was
placed in service.
- 662/3% if the recapture date is within the second full year after
the date the vehicle was placed in service.
- 331/3% if the recapture date is within the third full year after
the date the vehicle was placed in service.
Recapture date. The recapture date is generally the date of
the event that causes the recapture. However, the recapture date for an event described in
item (2), earlier, is the first day of the recapture year in which the event occurs.
How to report. Report the recapture amount as follows.
Individuals. Include the amount on line 61 of Form 1040.
Write QEVCR on the dotted line next to line 61.
Partnerships. Include on line 25 of Schedule K-1 (Form
1065) the information a partner needs to figure the recapture of the credit.
S corporations. Include on line 23 of Schedule K-1 (Form
1120S) the information a shareholder needs to figure the recapture of the credit.
C corporations. Include the amount on line 10 of Schedule J
(Form 1120), or line 7 of Part I (Form 1120-A). Check the box for Other and
attach the required schedule. See the instructions for Form 1120.
Basis Adjustments
If you claim a tax credit for a qualified electric vehicle you place in service during
the year, you must reduce your basis in that vehicle by the lesser of:
- $4,000, or
- 10% of the cost of the vehicle.
This basis reduction rule applies even if the credit allowed is less than that amount.
If you must recapture part or all of the credit, increase the basis of your vehicle by
the amount recaptured. If the qualified electric vehicle is depreciable property, you can
recover the additional basis over the vehicle's remaining recovery period beginning with
the tax year of recapture.
 If you were
using the percentage tables to figure your depreciation on the vehicle, you will not be
able to continue to do so. See Publication 946 for information on figuring your
depreciation without the tables.
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