Tax Breaks for New Clean-Fuel Vehicles

Alternative motor vehicle credit. This is a tax credit designed to encourage the development, manufacture and use of alternative fuel motor vehicles. Prior to 2011, there were five components to the alternative fuels credit. Four have expired. Only the qualified fuel cell motor vehicle credit remains through December 31, 2014.

Form 8910, Alternative Motor Vehicle Credit, is used to claim the alternative motor vehicle credit. If the vehicle is used for business purposes, the credit amount is also reported on Form 3800, General Business Credit. The credit amount for vehicles used for personal purposes is reported on line 54 of Form 1040.

Credit for plug-in electric vehicles. A credit ranging from $2,500 to $7,500 on the purchase of a qualifying passenger vehicle can be claimed on Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. The amount of the credit varies depending on the battery capacity and weight limitations.

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).

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