Tax Credits For EVs and Hybrid EVs
by P.D. Lesko
THE 1990 CENSUS estimated that 3.90 percent of American workers over the age of 16 walked to work. A decade later, the 2000 United States Census estimates that only 2.68 percent of American workers over the age of 16 walk to work. In the last decade, slightly more than a million people stopped walking to work. That automobile use has increased substantially since 1990 is no shock to part-time faculty — particularly those part-timers who piece together full-time work by teaching at multiple institutions. Alex Alixopulos teaches nine courses at three colleges, and he puts 200 miles a day on his car.
According to an article written by Paula Harris for a California Bay area newspaper, “The longtime Sonoma County adjunct instructor and Santa Rosa resident [Alixopulos] spends tedious hours
on Highway 101 shuttling between college campuses. He teaches morning classes in Pleasant Hill, beyond Vallejo, then drives back to Santa Rosa to teach afternoon and evening courses at Santa Rosa Junior College.”
For “freeway flyers,” commuting expenses can eat away a large portion of the monthly paycheck. The United States Tax Code, however, does not allow workers to deduct expenses incurred
while commuting from home to one’s place of employment. On the other hand, one may deduct commuting expenses incurred while driving between places of employment at the rate of 36.5 cents per mile (remember to keep an accurate daily written mileage log which clearly tracks deductible commuting miles and nondeductible miles).
I don’t want to focus on the standard mileage deduction, however. I want to talk about IRS tax credits available until 2005 to individuals who buy EVs and Hybrids. EV stands for Electric Vehicle. Anyone who commutes 65 miles per day or less should seriously consider leasing or buying an EV and taking advantage of these government tax credits, as well as the fuel cost savings associated with using alternative energy sources. (There is currently no generally available income tax credit for purchases of fuel-efficient vehicles). A 10 percent tax credit is provided for the cost of a qualified electric vehicle, up to a current maximum credit of $3,000.
According to the IRS, “A qualified electric vehicle is a motor vehicle that is powered primarily by an electric motor drawing current from rechargeable batteries, fuel cells, or other portable sources of electric current, the original use of which commences with the taxpayer, and that is acquired for use by the taxpayer and not for resale.” The full amount of the credit ($4,000) is available for purchases prior to 2002. To claim the credit retroactively, you would have to submit amended income tax forms. The deduction is not amortized (spread out over time), but must be taken in the year the vehicle is acquired.
IRS Form 8834 can be used to figure the credit for qualified electric vehicles placed in service during the year. The credit, however, will be reduced by 25 percent per year until it is fully phased out in 2004. There is a piece of legislation currently under consideration in Congress to extend the tax credit until 2011. There are also Clean Fuel Vehicle tax deductions and credits. These credits are scheduled to be phased out in 2005. Unfortunately, electric vehicles do not qualify for the clean-fuel vehicle deduction. That doesn’t mean EV and Hybrid owners can’t take advantage of state-sponsored programs, tax credits and deductions.
California, for instance, has one of the most comprehensive programs in place to encourage residents to purchase and drive Electric Vehicles, as well as Zero Emission Vehicles (ZEVs).
The California Air Resources Board (CARB), in conjunction with the State Energy Resources Conservation and Development Commission, distributes grants to individuals for the purchase
of eligible new zero emission light-duty cars or trucks. A maximum of $9,000 per vehicle is available. To find out if your state offers incentives, go to Plugin Cars. So, how much money are we talking about here to buy or lease an EV? If you’re the truck type, Ford offers the Ford Ranger EV. Only available for lease or sale in California at the moment, this electric version of the company’s popular light truck will go a top speed of 75 miles per hour and can range 65 miles in between charges. Lease charges vary, of course, and can run anywhere from $150-$250 per month. The trucks are priced at around $18,000.
As an aside, in two years Ford expects to introduce the Think City for sale in the United States. A two-seater, this car cruises at a top speed of 55 miles per hour and goes 55 miles between charges. Ford expects the City to retail for about $6,000.
General Motors offers the EV1, with a top speed of 80 miles per hour and a range of 55-130 miles per charge. The car is priced from $33,995. It may also be leased, and lease rates go from $349 to $574 per month. To find out more, visit http://www.gmev.com/.
Before the price stops you cold, remember the tax credits and state incentives. In California, for instance, a qualifying consumer could get a $9,000 grant toward the purchase of the car, and then take the federal tax credit, as well. What about options for those who commute past the range of the typical EV?
Well, that’s where the hybrids come in. The Honda Insight, a gas/electric hybrid car, costs around $20,000 and gets 70 miles to the gallon on the highway and 61 miles to the gallon in the city. The Toyota Prius is also a gas/electric hybrid. Prius’s mileage is rated at 52 m.p.g. highway and 45 m.p.g city. It retails for about the same price as the Honda Insight.
You don’t need to recharge these cars with a cord or any other external power supply. You don’t need to retrofit your home or garage in any way. You don’t need to have the dealer freshen the battery. You just drive these cars. You may not be able to join the ranks of the 3.4 million Americans who walk to work every day. However, you can join the ranks of taxpayers who are being rewarded for their environmentally sound vehicle purchases. Good luck and good commuting.
