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Alternative Motor Vehicle Tax Credits

When it comes to running a business, especially one that relies on transportation, it’s important that you take every advantage you can. It can be financially painful to purchase a new work vehicle every five to ten years and even more painful if you need to purchase more than one vehicle.

Luckily, the IRS gives you a chance to ease that pain just a little bit.

The Plug-In Electric Drive Vehicle Credit

The IRS created this credit almost 10 years ago as a way to incentivize people to purchase alternative motor vehicles. When it was initially launched, people who purchased plug-in hybrids or electric vehicles could receive a tax credit of anywhere from $2,500 to $7,500. That same credit applied to businesses.

But the IRS was smart, and it did not make the credits unlimited. Instead, it built into the system a phase-out for each manufacturer. Once the manufacturer sells 200,000 of the qualified vehicles, the credit has expired.

So, while the Prius and Volt are off the table, there are still a few vehicles that qualify for the credit in 2019. If they fit into the overall business plans, you should definitely take advantage. To find the latest updated list on the IRS website, click here.

An added bonus to this credit is that some states offer a separate tax credit as well. The Energy Sage website has the vehicle credit broken down by state. Click here to see if your state offers a separate tax credit.

As with all tax credits, there are a few other caveats. For one thing, you need to make sure that the vehicle is new and that you are purchasing the vehicle, not leasing it. If you’re leasing it, then the leasing agency (in most cases the dealership) is the one that has the right to claim the tax credit. You, of course, can work out a deal with the dealership to work that credit into the price of the purchase.

There are also mileage, fuel efficiency, and battery standards that the vehicle must meet in order to qualify as well.

One Purchase with Dual Benefit

Aside from the tax credit, there’s also the benefit of tax deductions. As a business owner, you know that assets like vehicles depreciate, which means you can write off a portion of the cost of the vehicle every year. Since tax credits and tax deductions are considered different items on a tax form, it’s possible to get a dual benefit from one purchase.

As with all advice provided on this blog, it’s very important that you talk to a tax professional about your specific situation. We realize that every company has different challenges and successes and what will benefit one company may not benefit another.

We here at The Tax Credit Group understand the intricacies of the tax laws and how to make them work to your advantage. Feel free to contact us at any time for a consultation.

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