How Your Next Vehicle Could Save on Income Taxes

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Did you know you could save up to $7,500 on your next vehicle — if that vehicle happens to be an all-electric or plug-in hybrid car?

And that doesn’t even count any savings on fuel at the pump by using an electric vehicle!

Most business people are aware that they can write off some of the costs of operating a standard gasoline- or diesel-based car, truck or van for business use. Whether by keeping track of actual operating expenses, or using the standard mileage deduction, you can get a tax write off for business use of a vehicle.

But with electric or plug-in hybrid vehicles, we’re talking about money that comes right off the top of your tax liability — in the form of a tax credit — for purchasing it. And you don’t even need to use the vehicle for business purposes in order to get the tax credit — consumers using a vehicle for their own personal purposes may be able to claim this electric vehicle tax credit.

So how does all of this work?

Well, here in the U.S., purchasers of certain all-electric or plug-in hybrid cars are entitled to a tax credit based on the vehicle’s battery capacity.

But first there are a few other caveats.

• You must be planning to use or lease the vehicle, not merely resell it, in order to qualify.
• Also, you must be the original user of the vehicle in order for the tax credit to be applicable, so again buying used or reselling such a vehicle will void the benefit. And the vehicle must be used primarily in the U.S.

Vehicles currently qualifying for the tax credit include the 2017 BMW i3 Sedan, the 2017 Chevrolet Bolt, the 2017 Chrysler Pacifica Plug-in Hybrid and the 2016 Tesla Model X.

Here’s one more caveat though. The full tax credit for all these vehicles begins to scale back after the manufacturer sells its 200,000th plug-in hybrid or all-electric car in the U.S.

For example, one previously qualifying vehicle, the Chevy Volt, passed the 100,000-vehicle sales mark in July 2016 and the Nissan Leaf did so in October 2016.

Confused? Don’t worry.

The Internal Revenue Service posts a list of cumulative sales for plug-in electric vehicles that should help you keep track. And a complete list of cars that qualify for the tax credit is also posted at FuelEconomy.gov.

As a small business owner, you know the benefits of saving money — and running an environmentally responsible business. Your efforts to reduce your company’s carbon footprint through an electric vehicle can impress customers.

And from your employees’ perspective, your commitment to the environment should improve morale and perhaps even help in recruiting.

But the move to an electric or hybrid plug-in vehicle can also pay off in dollars and cents.

We discuss the electric vehicle tax credit — and a whole lot more about energy tax savings strategies — in the free eBook Small Business Energy Tax Savings.

We teamed up with Constellation to compile various tax strategies involving energy usage, into a handy downloadable booklet form. Download your free copy of: Small Business Energy Tax Savings.

This article, "How Your Next Vehicle Could Save on Income Taxes" was first published on Small Business Trends