Tax Credits for Electric Vehicles Under the American Recovery and Reinvestment Act

The law allows for tax credits for 2 types of plug-in electric vehicles. They are:

Plug-In Electric Drive Vehicle Credit - this is a tax credit for vehicles with 4 or more wheels and a gross vehicle weight of under 14,000 pounds that draws propulsion from a battery with at least four kilowatt hours that can recharged from an external source of electricity, hence the term "plug-in". The amount of the credit ranges from $2,500 to $7,500 depending on the battery capacity. This credit is for qualified vehicles purchased after Dec 31, 2009 and will be reduced for manufacturers after they have sold 200,000 vehicles.

Plug-In Electric Vehicle Credit - this credit applies to two types of vehicles, certain low-speed electric vehicles and two or three wheeled vehicles. Qualified vehicles are those with an electric motor that draws electricity from a battery with a capacity of 4 kilowatt hours or more or be a two or three wheeled vehicle propelled by an electric motor from a battery with a capacity of 2.5 kilowatt hours. The amount of credit is 10% of the purchase price of the vehicle up to maximum of $2,500. Purchases must be made between Feb. 27, 2009 and Jan. 1, 2012 and cannot be claimed if the plug-in electric drive vehicle credit is allowable.

One other credit available is for:

Conversion Kits - this credit is for plug-in electric drive conversion kits. The amount of the credit is 10% of the cost of converting the vehicle to a plug-in electric vehicle. The vehicle must be placed in service after Feb. 17, 2009 and before Dec. 31, 2011.

Energy Incentives in the American Recovery and Reinvestment Act

This new law provides numerous incentives for individuals to invest in energy efficient products for their homes such as insulation, energy efficient windows, and energy efficient heating and air conditioning units. The act currently provides for a 30% tax credit for qualified products up to maximum credit of $1,500. This limit is in effect for years 2009 and 2010.

Other provisions of the Act allow a tax credit for various alternative energy equipment such as solar hot water heaters, geothermal heat pumps, and wind turbines. The credit for this equipment is 30% of the cost of the equipment.