Go Green and Save Some Green

If electric vehicle and other alt-fuel vehicles aren’t on the top of your list, you might want to reconsider. Taxpayers who purchase an eligible electric or alt-fuel vehicle can receive a tax credit of up to $7500.00 through the Plug-In Electric Drive Vehicle Credit. Here’s how it works:


First introduced in 2009 as part of the American Recovery and Investment Act, the credit was later expanded under the 2011 American Taxpayer Relief Act as a way to encourage taxpayers to purchase alt-fuel vehicles. If you purchase a qualified electric-drive vehicle you can claim a tax break of up to $7500.00. Your exact amount will vary, depending on the battery power of your vehicle. All qualified vehicles are eligible for a base credit of $2500.00. Taxpayers with vehicles that have at least 5 kilowatt hours will receive an additional $417.00. An additional $417.00 is applied for every additional kilowatt hour of batter power.


As with any IRS credit, there are qualifying standards.

  • The vehicle must be purchased for personal use and not for re-sale.
  • Vehicles must be purchased for use in the U.S.
  • The credit can’t be claimed until the title is transferred to the taxpayer in their state of residence.


One of the purposes of this credit was to encourage vehicle manufacturers to develop better fuel-efficient technologies for their products. To that end, the credit phases out after a vehicle manufacturer sells at least 200,000 units of a specific model for domestic use in the U.S.

Timing is everything. During the first two quarters after the 200,000-unit threshold has been reached, the credit is reduced to 50 percent. Instead of a max of $7500.00, you would receive a max of $3750. The credit is reduced to 25 percent during the third and fourth quarter of the phase-out year. The credit is reduced to zero after the fourth quarter when you purchase the same vehicle model included in the 200,000 unit threshold.

This credit might be just the incentive you need to purchase a plug-in electric/alt.-fuel vehicle. Some models may lack the style of their gas-fueled counterparts, but the prospect of a significant tax credit could sweeten the deal in your favor.