When do electric-car tax credits expire? (further update)

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2012 Toyota Prius Plug-In Hybrid - production model

2012 Toyota Prius Plug-In Hybrid - production model

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One month from today, personal income-tax returns are due for most U.S. adults.

Some of those taxpayers will have bought a plug-in electric car last year, knowing that the Federal government offers an income-tax credit to help reduce the effective cost.

But are this year's electric-car shoppers in danger of losing out on these credits if they wait too long?

WATCH THIS: 2016 Toyota Prius Vs 2016 Chevrolet Volt: Video Test

The short answer is no. Or at least, not if they buy within the next year or two.

UPDATE: We first published this article in July 2013. After five years of electric-car sales, we updated it to reflect aggregate sales through December 2015 and calculated credits remaining for the highest-volume carmakers.

Unlike a purchase rebate, which is basically a check in the mail, an income-tax credit is taken when the buyer files his or her U.S. income tax return for the year in which the electric car was purchased.

Credits range from $2,500 to $7,500 for battery-electric and plug-in hybrid passenger cars, based on the size of the battery pack.

The minimum pack size is 4 kilowatt-hours, and the scale runs from 4 kWh to 16 kWh (or more). For example: 

  • 2012-2015 Toyota Prius Plug-In Hybrid: $2,500
  • 2013-2016 Ford Fusion Energi & C-Max Energi: $4,007
  • 2011-2016 Chevrolet Volt, Nissan Leaf, Tesla Model S, others: $7,500

2013 Nissan Leaf, Nashville area test drive, April 2013

2013 Nissan Leaf, Nashville area test drive, April 2013

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Like the prior program of income-tax credits for purchase of a hybrid-electric car, which ended several years ago, there's a cap on how many cars from each maker qualify for the credits.

But whereas hybrids were capped at 60,000 vehicles per carmaker, plug-in vehicles have a higher cap: 200,000 cars per manufacturer.

That applies to sales in the United States only, and once that number is achieved, the credits start to phase out over a one-year period starting in the second quarter after that total is reached.

For two quarters, the credit is halved; for a third quarter, it is set at 25 percent of the original amount. Then, it's done.

The relevant rules can be found on the IRS website, including the phaseout:

The qualified plug-in electric drive motor vehicle credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”).

Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.

2011 Chevrolet Volt and 2013 Tesla Model S [photo: David Noland]

2011 Chevrolet Volt and 2013 Tesla Model S [photo: David Noland]

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In practice, General Motors and Nissan are closest to that limit. Through December 2015, GM had sold 95,403 Chevy Volts, Chevy Spark EVs, and Cadillac ELRs, and Nissan had sold 89,561 Leafs.

Tesla doesn't break out its sales by market, but it has likely sold about 50,000 electric cars.

Ford comes fourth, with a total of 58,918 split among its Fusion Energi, C-Max Energi, and Focus Electric models. Toyota is fifth, with 44,783 Prius Plug-In Hybrids and RAV4 EVs.

No other maker has delivered more than 20,000 plug-in cars in the U.S.

Not every single U.S. sale will result in a credit, either--although between sales to eligible individuals and credits that go to lease financing companies, most will.

But you still have some time before any maker starts to get close to that 200,000 total--so you can safely keep shopping.

Plug-in sales rose for four years and then plateaued last year: 17,500 were sold in 2011; 53,000 in 2012; 96,000 in 2013; 118,500 in 2014; and slightly less than that last year.

Sales are expected to resume rising in 2016, with an all-new, longer-range Chevy Volt on sale, a higher-range Nissan Leaf, and some new plug-in entries as well.

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