Vehicle Tax Credits


Alternative Motor Vehicle Credit

Taxpayers can claim (on Form 8910) an alternative motor vehicle credit (AMVC) for qualifying vehicles (five types, see below) placed in service during the tax year. The credit is allowed to the vehicle's owner (or lessor) ( Code Sec. 30B(b) ) or, for vehicles sold to and used by certain tax-exempt entities, the seller. ( Code Sec. 30B(h)(6)) 

 

Any part of the credit attributable to depreciable property is treated as part of the general business credit. ( Code Sec. 30B(g)(1). The remaining portion is a nonrefundable personal credit that, for tax years beginning after 2009 (when Code Sec. 26(a)(2) doesn't apply), can't exceed the excess of: (1) the sum of regular tax liability plus alternative minimum tax (AMT), over (2) the sum of the credits under Code Sec. 21 – Code Sec. 26 (other than the AMVC, residential energy efficient property credit, qualified plug-in electric vehicle credit, and new qualified plug-in electric drive motor vehicle credit) plus the foreign tax credit, for the year. ( Code Sec. 30B(g)(2)) Thus, the credit is allowed against AMT.  But it can't be carried to other tax years.

 

To qualify for the AMVC, a motor vehicle (defined in Code Sec. 30B(h)(1) ) must comply with the applicable provisions of the Clean Air Act, and applicable motor vehicle safety provisions ( Code Sec. 30B(h)(10)), and must be used predominantly in the U.S. ( Code Sec. 30B(h)(7) 

 

No AMVC is allowable for any part of the cost taken into account under Code Sec. 179 . ( Code Sec. 30B(h)(7)) The vehicle's basis must be reduced by the AMCV allowed. ( Code Sec. 30B(h)(4)) But a taxpayer may elect not to claim the AMVC for a vehicle. ( Code Sec. 30B(h)(9) 

 

The AMVC is the sum of the following five credits: ( Code Sec. 30B )

(1) New qualified fuel cell motor vehicle credit for the purchase (before 2015 ( Code Sec. 30B(k)(1))) of a fuel cell vehicle. The credit equals a base credit amount that depends upon the vehicle's weight class and, for passenger cars or light trucks (vehicles weighing 8,500 pounds or less), plus an amount that depends upon the vehicle's rated fuel economy compared to a base fuel economy. A qualifying fuel cell vehicle must be propelled by power derived from one or more cells that convert chemical energy directly into electricity by combining oxygen with hydrogen fuel stored on board the vehicle. ( Code Sec. 30B(b) 

 

(2) New advance lean-burn technology motor vehicle credit for the purchase (before 2011 ( Code Sec. 30B(k)(2) )) of an advanced lean burn technology motor vehicle. The credit equals: (a) a fuel economy credit amount that varies with the vehicle's rated fuel economy compared to a 2002 model year standard, plus (b) a conservation credit amount based on the vehicle's estimated lifetime fuel savings compared to a comparable 2002 model year vehicle. A qualifying advanced lean-burn technology motor vehicle is a passenger car or light truck with an internal combustion engine that's designed to operate primarily using more air than is necessary for complete combustion of the fuel, incorporates direct injection, and achieves at least 125% of the 2002 model year city fuel economy. ( Code Sec. 30B(c).  For phaseout, see below.

 

(3) New qualified hybrid motor vehicle credit for the purchase (before 2011 Code Sec. 30B(k)) of an auto or light truck. The credit amount varies with the vehicle's rated fuel economy compared to the 2002 model year. A new qualified hybrid motor vehicle is a motor vehicle that draws propulsion energy from onboard sources of stored energy that include both an internal combustion engine or heat engine using combustible fuel and a rechargeable energy storage system (e.g., batteries). ( Code Sec. 30B(d). For phaseout, see below.

 

(4) New qualified alternative fuel motor vehicle credit (for property purchased before 2011). The credit equals 50% of a vehicle's incremental cost, plus an additional 30% if the vehicle meets certain emissions standards, but not more than between $4,000 and $32,000 depending upon the weight of the vehicle. A reduced credit applies to certain “mixed-fuel” vehicles. A new qualified alternative fuel motor vehicle is a motor vehicle that's only capable of operating on an alternative fuel, compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen, and any liquid fuel that is at least 85% methanol. ( Code Sec. 30B(e) 

 

(5) Plug-in electric vehicle conversion credit for any motor vehicle that's converted (before 2012) into a Code Sec. 30D qualified plug-in electric drive motor vehicle ( ¶ 2367 ). The credit is 10% of the cost of converting the vehicle, with a $4,000 credit maximum. ( Code Sec. 30B(i)) 

 

A credit is also available for certain new qualified “heavy” hybrid vehicles weighing in excess of 8,500 pounds, including heavy trucks, buses, industrial, agricultural or military vehicles. ( Code Sec. 30B(d)(2)(B)

 

Phaseout. The credit for advanced lean burn technology and hybrid motor vehicles phases out beginning in the second calendar quarter following that in which a manufacturer sells its 60,000th qualified vehicle for use in the U.S. (50% credit reduction in second and third quarter; 75% in fourth and fifth quarter; 0 credit allowed thereafter). ( Code Sec. 30B(f)) The credit is completely phased out for Toyota and Honda cars. The credit was reduced for Fords as of Apr. 1, 2009 (with no credit after Mar. 31, 2010), and as of July 1, 2010 (no credit after Dec. 31, 2010 because credit expires) for Volkswagens. 

 

For a list of qualifying vehicles and AMVC amounts, see http://www.irs.gov/businesses/corporations, under “Alternative Motor Vehicle Credit.”


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