Federal Tax Incentives: 

Plug-In Electric Drive Vehicle Credit (IRC § 30D)

Qualified Plug-In Electric Drive Motor Vehicle & 2-Wheeled Plug-In Electric Vehicle Credits

 

The IRC § 30D "Plug-In Electric Drive Motor Vehicle Credit" originally was enacted in the Energy Improvement and Extension Act of 2008 and has been amended multiple times in recent years. Under IRC § 30D(a), if you purchased a plug-in electric vehicle or light truck you may be eligible for federal tax credits. This tax credit incentive is available for the purchase of a new qualified plug-in electric drive motor vehicle that draws propulsion using a traction battery that has at least five kilowatt-hours (kWh) of capacity, uses an external source of energy to recharge the battery, has a gross vehicle weight rating of up to 14,000 pounds, and meets specified emission standards.


For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500. 

As such, the ("4-wheel") Qualified Plug-In Electric Drive Motor Vehicle Credit credit ranges between $2,500 and $7,500, depending on the capacity of the battery. The credit begins to phase out for a manufacturer, when that manufacturer sells 200,000 qualified vehicles.

You may also be eligible for a credit under IRC § 30D(g), if you purchased a 2-wheeled vehicle that draws energy from a battery with at least 2.5 kilowatt hours and may be recharged from an external source. The credit is 10% of the purchase price of the vehicle with a maximum credit of $2,500. The most recent tax extender package under the "Taxpayer Certainty and Disaster Tax Relief Act of 2019" as part of the year-end appropriations action ("H.R.1865 - Further Consolidated Appropriations Act, 2020") extended the availability of 2-wheeled plug-in electric vehicle credit through amendment and applies to 2-wheeled vehicles acquired after December 31, 2017 through January 1, 2021.

In general, the vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States and in compliance with specific Air Quality And Motor Vehicle Safety Standards​ as provided in I.R.C. § 30D(f)(7). For purposes of IRC § 30D credit, a vehicle is generally not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.

For additional details and authority outlining the credit, see below.

Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC § 30D) Phase Out

The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”).

Qualifying vehicles manufactured by that manufacturer are eligible for 50% of the credit if acquired in the first two quarters of the phase-out period and 25% of the credit if acquired in the third or fourth quarter of the phase-out period.  Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.


The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For additional information see Notice 2009-89.

I.R.C. § 30D(e) Limitation On Number Of New Qualified Plug-In Electric Drive Motor Vehicles Eligible For Credit

In general, regarding new qualified plug-in electric drive motor vehicle sold during the phaseout period, only the applicable percentage of the credit otherwise allowable shall be allowed as noted below.

 

I.R.C. § 30D(e)(3) Applicable [Phaseout] Percentage — 

  • 50% for the first 2 calendar quarters of the phaseout period,

  • 25% for the 3d and 4th calendar quarters of the phaseout period, and

  • 0% for each calendar quarter thereafter.

 

The phaseout period is the period beginning with the second calendar quarter following the calendar quarter which includes the first date on which the number of new qualified plug-in electric drive motor vehicles manufactured by the manufacturer of the vehicle sold for use in the United States after December 31, 2009, is at least 200,000. Moreover, for applicable Control Group situations, I.R.C. § 30D(e)(4) states rules similar to the rules of section 30B(f)(4) shall apply.​

Qualified Plug-In Electric Drive Motor Vehicle Credit

I.R.C. § 30D(a), (b) provides, in general, the Qualified Plug-In Electric Drive Vehicle credit applies to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year. The amount of the credit determined with respect to any new qualified plug-in electric drive motor vehicle is the sum of the following amounts with respect to such vehicle:

  • I.R.C. § 30D(b)(2) Base Amount — $2,500; and 

  • I.R.C. § 30D(b)(3) Battery Capacity — In the case of a vehicle which draws propulsion energy from a battery with not less than 5 kilowatt hours of capacity, the amount is $417, plus $417 for each kilowatt hour of capacity in excess of 5 kilowatt hours which shall not exceed $5,000.


I.R.C. § 30D(d) New Qualified Plug-In Electric Drive Motor Vehicle
In general, the term “new qualified plug-in electric drive motor vehicle” means a motor vehicle meeting the following pursuant to I.R.C. § 30D(d)(1):

  • original use of which commences with the taxpayer;

  • acquired for use or lease by the taxpayer and not for resale;

  • made by a manufacturer;

    • I.R.C. § 30D(d)(3) provides the term “manufacturer” has the meaning given such term in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).​

  • treated as a motor vehicle for purposes of title II of the Clean Air Act;

    • I.R.C. § 30D(d)(2) defines the term “motor vehicle” means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.

  • which has a gross vehicle weight rating of less than 14,000 pounds; and

  • which is propelled to a significant extent by an electric motor which draws electricity from a battery which—

    • has a capacity of not less than 4 kilowatt hours, and

      • I.R.C. § 30D(d)(4) states the term “capacity” means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.​

    • is capable of being recharged from an external source of electricity.

2-Wheeled Plug-In Electric Vehicle Credit

I.R.C. § 30D(g) Credit Allowed For 2- And 3-Wheeled Plug-In Electric Vehicles
I.R.C. § 30D(g), provides in general, in the case of a qualified 2-wheeled plug-in electric vehicle a tax credit for the applicable taxable year an amount equal to the sum of the applicable amounts (noted below) for each qualified 2-wheeled plug-in electric vehicle placed in service by the taxpayer during the taxable year

  • the applicable amount is an amount equal to the lesser of—

    • I.R.C. § 30D(g)(2)(A) — 10% of the cost of the qualified 2-wheeled plug-in electric vehicle, or

    • I.R.C. § 30D(g)(2)(B) — $2,500.

I.R.C. § 30D(g)(3) defines the term “qualified 2- or 3-wheeled plug-in electric vehicle” means any vehicle which—

  • has 2 or 3 wheels [3-wheeled plug-in electric vehicle credit eligbility expired as of January 1, 2014, see I.R.C. § 30D(g)(3)(E)(i)],

  • meets the requirements of subparagraphs (A), (B), (C), (E), and (F) of I.R.C. § 30D(d)(1) (determined by substituting “2.5 kilowatt hours” for “4 kilowatt hours” in I.R.C. § 30D(F)(i)), as outlined below;

    • original use of which commences with the taxpayer;

    • acquired for use or lease by the taxpayer and not for resale;

    • made by a manufacturer;

      • I.R.C. § 30D(d)(3) provides the term “manufacturer” has the meaning given such term in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of the administration of title II of the Clean Air Act (42 U.S.C. 7521 et seq.).​

    • treated as a motor vehicle for purposes of title II of the Clean Air Act;

      • I.R.C. § 30D(d)(2) defines the term “motor vehicle” means any vehicle which is manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and which has at least 4 wheels.

    • has a gross vehicle weight rating of less than 14,000 pounds; and

    • propelled to a significant extent by an electric motor which draws electricity from a battery which—

    • has a capacity of not less than [2.5] kilowatt hours, and

      • I.R.C. § 30D(d)(4) states the term “capacity” means, with respect to any battery, the quantity of electricity which the battery is capable of storing, expressed in kilowatt hours, as measured from a 100 percent state of charge to a 0 percent state of charge.​

    • is capable of being recharged from an external source of electricity.

  • is manufactured primarily for use on public streets, roads, and highways,

  • is capable of achieving a speed of 45 miles per hour or greater, and

  • is acquired, in the case of a vehicle that has 2 wheels, after December 31, 2014, and before January 1, 2021 (see I.R.C. § 30D(g)(3)(E)(ii)).

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