Posted by: Jerry Garrett | December 25, 2010

The Great Electric Car Tax Credit Ripoff, Part II

First Nissan LEAF was sold 12/11/10 in San Francisco (Courtesy Nissan)

Nissan just delivered its first LEAF electric car to a retail customer earlier this month. The first! And even before the new car smell had worn off that one, government agencies that had once promised big “tax rebates” for EV buyers were already warning that rebate money isn’t going to last long.

Surprised? I’m not.

ElectricVehicleTaxCredit.com

These are the same much-ballyhooed tax rebates that auto manufacturers touted as something akin to a discount of thousands off the MSRP. These were the rebates that were going to make EVs “competitive” in pricing against equivalent conventional gasoline-powered cars (which cost at least $5,000-$10,000 less). These are the same tax rebates that I lambasted in a column here last May as deceptive, and not likely to apply to very many buyers. Why not? Because they are really money off your yearly federal or state tax bill – and they apply only if you owe the government big dough.

Now at least one government agency is telling us the money earmarked for the rebates may be used up before summer.

ARB, not CARB, despite the logo

A case in point: California’s Air Resources Board reportedly has $8 million set aside for a $5,000 rebate offered by the state, if you buy an EV in the Golden State. A spokesman for Plug-In America, an EV enthusiast group, told The Los Angeles Times that he doesn’t expect that money – enough to cover only the first 1,600 buyers who qualify – will last “beyond mid-2011.”

Actually, here’s another thing about the “tax rebates”: No money ever comes back to you.

You don’t see any of that money – until you get your tax refund – the following year. For example, if you buy an EV in January 2011, you pay full price for the car. Sometime in 2012, you file your 2011 taxes (either April 15 or, if you file for an extension, October 15). Then, you wait another 6-8 weeks for any tax refund you might have coming. Your “rebate” will merely be money deducted you’re your tax bill. You don’t get a “rebate check” like you may have falsely been led to believe was coming your way. (Again, if you don’t owe $7,500 in federal, or $5,000 in state, taxes – you don’t get the full value of the tax rebates available.)

Not exactly $7,500 off (Nissan ad)

In the meantime, as stated above, you pay the full price of the car ($32,780, in the LEAF example), plus the full sales taxes due (at 9.75 percent in Los Angeles, for example, that’s another $1,200). This is true, even if you decide to lease the car instead of buying it.

“The credit is a direct ‘offset for taxes that are owed’,” noted Craig Castanos, a San Diego-based CPA when I contacted him for my original story last May. That means if you owe between $0 and $7,500 in federal tax, in a given tax year, your electric car “credit” will only be deducted from the balance you owe. Anything leftover goes to waste; you lose it. There are no “rollover” credits, like cell phone minutes.

Citizens demand to know what happened to their EV tax credits (RKO)

The same math would apply to any state credit, such as the $5,000 California credit.

This tax math applies also to the tax rebates offered for the home charging units, such as the $2,200 machine that Nissan offers as a LEAF optional.

Keep this in mind too: If you pay the dreaded Alternative Minimum Tax (AMT) you wouldn’t be able to offset any EV tax credit against that. There is no escape from the AMT.

In your dreams...

The federal $7,500 rebate is only offered to the first 200,000 customers each auto company has for its EV offerings (Nissan plans to be able to sell 300,000 LEAFs by 2012). Your EV must have a 16-kilowatt-hour battery or larger to qualify for the full amount of the rebate (the Chevrolet Volt has an 8-kw/h battery, so it only qualifies for half of the rebate).

Forget the tax rebate; here's your real windfall.

The complete breakdown of which government entity is dangling which incentive is available at Plug-In America’s website. They are all faithfully listed, regardless of how unlikely it might be that EV purchasers will actually qualify for them. Or, even if they do qualify, find funds still earmarked in the governments’ budgets to allow the offsets for them. Fine print in the government offers usually stipulates the offer is good only as long as funds are available. Act fast.

Jerry Garrett

December 25, 2010 (Merry Christmas)

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Responses

  1. Hey there! This post could not be written any better!
    Reading this post reminds me of my previous room mate!
    He always kept talking about this. I will forward this page to him.
    Pretty sure he will have a good read. Thanks for sharing!


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