A taxpayer may qualify for the Plug-in Electric Drive Motor Vehicle Credit if he purchases a new plug-in vehicle with at least a 4 kWh battery and uses the vehicle primarily in the United States, according to the IRS. Vehicles converted to become hybrids do not qualify.
The vehicle must be purchased as a new vehicle with four wheels, be 14,000 pounds or less and be made by a manufacturer, explains the IRS. Off-road and low-speed vehicles do not qualify. Used vehicles or vehicles purchased for resale do not qualify. The vehicle must have at least a 4 kWh battery and be capable of being charged from an external power source.
The tax credit is deducted from the amount of taxes owed. If the taxpayer does not owe taxes, he does not get the credit. The minimum credit is $2,500 with an additional $417 for each kWh of battery capacity over 4 kWh, up to a maximum credit of $7,500. The credit can only be claimed during the tax year the vehicle was placed in service, notes the IRS.
The tax credit begins a one-year phasing out period for a specific vehicle once the vehicle's manufacturer sells at least 200,000 qualifying vehicles in the United States, explains the IRS. Vehicles sold by the manufacturer after the phase-out period do not qualify for the tax credit.