Kelly Bullis: Tax credits on plug-in hybrid cars

I heard an interesting bit of information the other day. Over 50% of current full electric vehicle owners plan on getting a gasoline powered car the next time they purchase. Why? “Recharge anxiety.” Ranges for fully electric vehicles can be quite disappointing and when an EV runs out of juice, it just stops, which can be mighty inconvenient.

On the flip side, sales of hybrids are going up. You can still save the planet with a hybrid and have that nasty gas engine available as a backup. There is a newer category of hybrid that is starting to come on strong. A “plug-in hybrid electronic vehicle” (abbreviated PHEV). Basically, the PHEV has a smaller battery pack than a full EV, so it doesn’t go as far as a full EV but having that “evil” gas burning engine on board as a backup is mighty inviting. Like a full EV, a PHEV can be plugged in at night and driven on full batteries, but only for about 40-60 miles. For many folks, that is still less than the average daily round-trip commute, which makes it still a full EV for them. (It just has that backup gas engine giving them a lot more peace of mind.)

Starting in 2024, you can get the tax credit for purchasing a PHEV at the dealership, rather than waiting until you file your tax return. (No tax credit for normal hybrid vehicles.) The amount of the tax credit depends on details including where the vehicle was assembled and where certain components (such as the minerals in the battery) come from. The car dealerships have the ability to easily compute the available tax credit on any PHEV in their inventory.

There are also price limits. If your PHEV costs too much, you lose the tax credit. Vans and SUVs and pickup trucks cannot have a manufacturer’s suggested retail price (MSRP) of more than $80,000; sedans and other vehicles are limited to a MSRP of $55,000 or less. But wait, there’s even another communist limitation. If you make too much money, you cannot get the tax credit. If your modified adjusted gross income (see a prior column on the stupidity of how to define “modified adjusted gross income”) is $300,000 or higher as a married couple ($150,000 for singles), you don’t get to take the credit.

There is another option. Lease instead of purchase. This gives you a shorter ownership life, giving the opportunity of ever improving technology to be available earlier to you. Leased vehicles are classified as commercial vehicles, making them eligible for the full federal clean vehicle tax credit of $7,500 without any income or pricing limitations. The leasing company gets the credit, but you can push them to pass that through in the lease terms (potentially hundreds off the monthly lease amount), so, in essence, you can get the credit.

Have you heard? Psalm 31:16 says, “Make your face to shine on your servant. Save me in your loving kindness.”

Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.