Electric Vehicle Credit Starts to Phase Out for Tesla and General Motors (IR-2019-57)

Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks. For vehicles acquired after Dec. 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. 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.

Tax practitioner resource: Vehicles eligible for the credit and the amount of the qualifying credit can be found here.

Tesla sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit during the third quarter of 2018. This triggers a phase out of the tax credit available for purchasers of new Tesla plug-in electric vehicles beginning Jan. 1, 2019.

General Motors sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit during the fourth quarter of 2018. This triggers a phase out of the tax credit available for purchasers of new General Motors plug-in electric vehicles beginning April 1, 2019.

Watch for a legislative fix. Because the phaseout affects early innovators in the electric vehicle industry, legislation has been proposed to allow up to a $7,000 credit for the next 400,000 vehicles sold. If your client is asking about the electric vehicle credit, suggest that they wait a few months to buy a Tesla or GMC vehicle to see if Congress gets around to extending the credit.

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