| Publication 535 |
2001 Tax Year |
Electric Vehicle Credit
You can choose to claim a tax credit for a qualified electric
vehicle you place in service during the year. You can make this choice
regardless of whether the property is used in a trade or business.
Qualified Electric Vehicle
A vehicle is a qualified electric vehicle if it meets all the
following requirements.
- It is a motor vehicle (defined earlier) powered primarily by
an electric motor drawing current from rechargeable batteries, fuel
cells, or other portable sources of electrical current.
- You were the first person to use it.
- You acquired it for your own use and not for resale.
- It has never been used as a nonelectric vehicle.
- It is not nonqualifying property, defined earlier.
Amount of the Credit
The credit is generally 10% of the cost of each qualified electric
vehicle you place in service during the year. If your vehicle is a
depreciable business asset, you must reduce the cost of the vehicle by
any section 179 deduction before figuring the 10% credit. If you need
information on the section 179 deduction, see Publication 946.
Credit limits.
The credit is limited to $4,000 for each vehicle. The total credit
is limited to the excess of your regular tax liability, reduced by
certain credits, over your tentative minimum tax. To figure the credit
limit, complete Form 8834 and attach it to your tax return.
How To
Claim the Credit
You must complete and attach Form
8834 to your tax return to claim
the electric vehicle credit. Enter your credit on your tax return as
discussed next.
Individuals.
Individuals claim the credit by entering the amount from line 20 of
Form 8834 on line 50 of Form 1040. Check box "d" and specify Form
8834.
Partnerships.
Partnerships enter the amount from line 20 of Form 8834 on line 13
of Schedule K (Form 1065). The partnership then allocates the credit
to the partners on line 13 of Schedule K-1 (Form 1065). See the
instructions for Form 1065.
S corporations.
S corporations enter the amount from line 20 of Form 8834 on line
13 of Schedule K (Form 1120S). The S corporation then allocates the
credit to the shareholders on line 13 of Schedule K-1 (Form
1120S). See the instructions for Form 1120S.
C corporations.
C corporations claim the credit by entering the amount from line 20
of Form 8834 in the total for line 6c of Schedule J (Form 1120),
checking the "Other" box and entering "8834" in the space
provided. See the instructions for Form 1120.
Recapture of the Credit
The electric vehicle credit is subject to recapture if, within 3
years after the date you place the vehicle in service, it ceases to
qualify for the electric vehicle credit. You recapture the credit by
adding it, or part of it, to your income tax for the year in which the
recapture event occurs.
The vehicle will cease to qualify if it is changed in either of the
following ways.
- It is modified so that it is no longer primarily powered by
electricity.
- It becomes nonqualifying property, defined earlier.
Sales or other dispositions.
If you sell or otherwise dispose of the vehicle within 3 years
after the date you placed it in service and know or have reason to
know that it will be changed in either of the ways described above,
you are subject to the recapture rules. In other dispositions
(including a disposition by reason of an accident or other casualty),
the recapture rules do not apply.
If the vehicle was subject to depreciation, the credit (minus any
recapture amount) is considered depreciation when figuring the part of
any gain from the disposition that is ordinary income. See Publication 544
for more information on dispositions of depreciable property.
Recapture amount.
Figure your recapture amount by multiplying the credit by the
following percentage.
- 100% if the recapture date is within the first full year
after the date the vehicle was placed in service.
- 66 2/3% if the recapture date is within the
second full year after the date the vehicle was placed in
service.
- 33 1/3% if the recapture date is within the
third full year after the date the vehicle was placed in
service.
Recapture date.
The recapture date is generally the date of the event that causes
the recapture. However, the recapture date for an event described in
item (2), earlier, is the first day of the recapture year in which the
event occurs.
How to report.
Report the recapture amount as follows.
Individuals.
Include the amount on line 58 of Form 1040. Write "QEVCR" on
the dotted line next to line 58.
Partnerships.
Include on line 25 of Schedule K-1 (Form 1065) the
information a partner needs to figure the recapture of the credit.
S corporations.
Include on line 23 of Schedule K-1 (Form 1120S) the
information a shareholder needs to figure the recapture of the credit.
C corporations.
Include the amount on line 10 of Schedule J (Form 1120), or line 7
of Part I (Form 1120-A). Check the box for "Other" and
attach the required schedule. See the instructions for Form 1120.
Basis Adjustments
If you claim a tax credit for a qualified electric vehicle you
place in service during the year, you must reduce your basis in that
vehicle by the lesser of:
- $4,000, or
- 10% of the cost of the vehicle.
This basis reduction rule applies even if the credit allowed is
less than that amount.
If you must recapture part or all of the credit, increase the basis
of your vehicle by the amount recaptured. If the qualified electric
vehicle is depreciable property, you can recover the additional basis
over the vehicle's remaining recovery period beginning with the tax
year of recapture.
If you were using the percentage tables to figure your depreciation
on the vehicle, you will not be able to continue to do so. See
Publication 946
for information on figuring your depreciation without
the tables.
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