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2010 will be the year of the plug-in, with the 2011 Chevy Volt hitting California markets for the first time early next year. Say good-bye to gasoline Chevy engines, the future is coming! To pave the way for the new plug-in electric hybrid, GM is teaming up with California utilities to build 500 charging stations for commercial, public and residential use. Meanwhile, Nissan is gearing up its 367 miles per gallon Leaf and Toyota has a Plug-in Prius Hybrid waiting in the wings, too.
These electric cars, while sure to lighten your yearly spending on gasoline, don’t come cheap. The Chevy Volt has a projected $40,000 price tag. But some relief comes in the form of federal and state tax breaks, which reward consumers for choosing more eco-friendly vehicles.
As part of the American Recovery and Reinvestment Act of 2009, there are currently automobile tax credits available for Hybrid Gas-Electric and Alternative Fuel Vehicles, Plug-in Electric Vehicles, Plug-In Hybrid Conversion Kits and Low Speed and 2- or 3- Wheeled Plug-in Vehicles.
The plug-in electric vehicle tax credit kicks in after December 31, 2009 (listen up, prospective Volt owners) and qualifies you for a credit between $2,500 and $7,500. How much you end up getting to credit to your taxes depends on the size of the battery. For every kWh above 4 kWh, you are entitled an additional $417 up to $7,500. Since the Volt has a 16 kWh, it gets the full tax credit.
Note though that the tax credit only applies to the first 200,000 plug-in cars sold in the U.S. After that, it’ll be phased out to 50% for the next two quarters and then 25% for two more quarters before finally being wound down.
For those who are unsure of how a tax credit works, you should note that it’s very different from a tax deduction. Tax deductions reduce the amount of income you are liable to pay taxes on. Tax credits are a dollar for dollar reimbursement on the total amount you are liable for paying. So, as long as you pay more than $7,500 in taxes, you stand to pocket the full amount as if it were cash. The qualified plug-in electric vehicle credit is non-refundable, meaning that if your tax credit exceeds the amount you owe the federal government, that money is lost. If you’re affording a $40,000 vehicle, the hopes are that you’ll be making enough to pay that much – but you may want to make double-check that before counting on that savings!
