Friday, February 18, 2011

The EVSE Tax Credit a.k.a. The Alternative Fuel Vehicle Refueling Property Credit

What is it?

The Electric Vehicle Service Equipment (EVSE) Tax Credit, as it's sometimes referred, is actually not called that for the purposes of tax law.  As people file their 2010 taxes, they are finding out that this credit is actually covered on IRS Form 8911: Alternative Fuel Vehicle Refueling Property Credit.  Despite its misleading name and repeated references to Hydrogen refueling, this is the form you should file if you installed an EVSE in your home in 2010 for the purposes of charging an electric vehicle and plan to take the credit — of course, why else would you put an EVSE in your home except to charge an electric vehicle, but technically that's all it's allowed to be used for.

How do I fill it out?

Like most IRS forms, the calculations required for form 8911 consist of simple math: addition, subtraction, multiplication and table lookup as well as finding the minimum of 2 values.  The directions are as follows:

  • Line 1(b): Enter the total cost of the EVSE install (Including parts and hired labor).

  • Lines 2-11: Ignore (unless you installed the EVSE as part of a business).

  • Line 12(b): Copy Line 1(b).

  • Line 13(b): Do nothing; the value of this line is 0.50 or 50%.

  • Line 14(b): Line 12(b) × Line 13(b) (i.e. Line 12(b) × 0.50).

  • Line 15(b): Enter $2,000 (unless you moved in 2010, then you can declare it for the EVSE installation in both homes, in which case enter $4,000)

  • Line 16(b): Line 14(b) < Line 15(b) ? Line 14(b) : Line 15(b), i.e. the minimum of Line 14(b) and Line 15(b).

  • Line 17: Copy Line 16(b) (or, add to Line 16(a) if you're also declaring a Hydrogen Refueling Station)

  • Line 18: Copy Form 1040, Line 44 or Form 1040NR, Line 42 (Nonresident Alien — people living in the U.S. that are not U.S. Citizens nor in possession of a Green Card; typically this is if you're in the U.S. on a work or student visa) or your regular tax before credits.

  • Line 19a: Enter $0 (unless you have some overseas credit to add).

  • Line 19b: This one's complicated:

    Form 8911: Line 19b Instructions:

    Enter the total, if any, credits from Form 1040, lines 48 through 52 (or Form 1040NR, lines 46 through 49 for Nonresident Aliens); Form 8396, line 9; Form 8859, line 3; Form 8834, line 22; Form 8910, line 21; Form 8936, line 14; and Schedule R, line 22.

    This is adding up all your other tax credits, namely:

    • Credit for child and dependent care expenses. Attach Form 2441.  (Form 1040, Line 48; Form 1040NR, Line 46)

    • Education credits from Form 8863, line 23.  (Form 1040, Line 49)

    • Retirement savings contributions credit. Attach Form 8880. This the sum of your Traditional and Roth IRA contributions.  (Form 1040, Line 50; Form 1040NR, Line 47)

    • Child tax credit (see instructions).  (Form 1040, Line 51; Form 1040NR, Line 48)

    • Residential energy credits. Attach Form 5695.  This includes all energy efficiency home improvement credits including additional insulation, more efficient exterior windows and better-insulating exterior doors or heat-reducing exterior roofing, as well as Photovoltaic panels, a solar thermal water heater, wind power generators or a geothermal heat pump.  (Form 1040, Line 52; Form 1040NR, Line 49)

    • Mortgage Interest Credit.  Not to be confused with the Mortgage Interest Deduction; most people don't qualify for this credit.  (Form 8396)

    • District of Columbia First-Time Hombuyer Credit. (Form 8859)

    • Qualified Plug-in Electric and Electric Vehicle Credit.  This is for originally built 2- or 3-wheeled vehicles or city-cars limited to low speeds purchased in the tax year.  (Form 8834)

    • Alternative Motor Vehicle Credit.  This credit is for alternative motor vehicles and plug-in electric vehicle conversions; it's not for cars originally built as plug-in hybrid electric or purely electric vehicles.  (Form 8910)

    • Qualified Plug-in Electric Drive Motor Vehicle Credit.  This credit is for originally built plug-in hybrid or purely electric vehicles capable of highway speeds.  (Form 8936)

    • Credit for the Elderly or the Disabled.  (Schedule R)

    The thing to note here from an environmental perspective is that your are calculating your taxes after all energy-efficiency, energy-generation and electric vehicle credits.  This means that if you declare one or more of these credits in the same year as you try to declare the EVSE credit, it's possible you may be disallowed from the EVSE credit due to the Alternative Minimum Tax (AMT).  Interestingly, the way Form 5695 is written, you have the same problem with the energy-efficiency and energy-generation credits with the electric vehicle credit: if you try to declare both, you may end up not getting the energy-efficiency and energy-generation credits due to AMT.

  • Line 19c: Copy Form 8834, Line 29.  This is the other half of Form 8834, the Qualified Plug-in Electric and Electric Vehicle Credit for originally built 2- or 3-wheeled vehicles or city-cars limited to low speeds, but applies this time to the value for the credit carried over from previous tax years.

  • Line 19d: Add Line 19a + Line 19b + Line 19c

  • Line 20: Subtract Line 19d from Line 18 (Line 18 - Line 19d)

  • Line 21: Copy Form 6251, Line 33, Alternative Minimum Tax—Individuals.  Notice here that the AMT is calculated before any of your credits have been applied.

  • Line 22: Subtract Line 21 from Line 20 (Line 20 - Line 21: difference between your regular tax with credits and AMT before credits).

  • Stop if Line 22 < 0!

  • Line 23: Line 17 < Line 22 ? Line 17 : Line 22, i.e. the minimum of Line 17 and Line 22

  • Copy Line 23 to Form 1040, Line 53 or Form 1040NR, Line 50 (Nonresident Aliens), as applicable.

    And you can't carry over any lost credit into subsequent tax years:

    Form 8911: Line 23 Instructions:

    If you cannot use part of the personal portion of the credit because of the tax liability limit, the unused credit is lost. The unused personal portion of the credit cannot be carried back or forward to other tax years.

The main thing to take away here is that many people who bought an electric vehicle in 2010 and who file Form 8936 for the $7,500 credit and also installed an EVSE in their home may not be able to get the EVSE tax credit because Form 8911 compares your regular tax after credits to your AMT before credits even though you can declare the Qualified Plug-in Electric Drive Motor Vehicle Credit regardless of AMT.  Since most people who buy qualified electric motor vehicles also bought an EVSE in the same year, many people are going to be denied this credit in the one year they would be using it.  This is truly unfortunate in my opinion, though I, personally, consider myself eminently fortunate for having installed my EVSE in 2010, before I could buy my EV.

How do I declare this credit in Turbo Tax

At the time of this writing, Turbo Tax is taking the rather idiotic position that most people won't be filing Form 8911 in 2010.  In the same year when electric vehicles went mainstream, Turbo Tax thinks that people aren't going to install the equipment specifically created to service them?  Are they insane?

I would encourage all my readers to file a request with Turbo Tax to convince them that Form 8911 is highly relevant to the 2010 tax year and they should add it to the program at the soonest possible update.  Without this update, users taking the credit won't be able to e-file their returns, making this program practically useless since all forms will need to be filled out by hand anyway without the ability to e-file.

To register a complaint with Turbo Tax, do the following:

  • Visit https://turbotax.intuit.com/support/contact/index.jsp.

  • To try the Online Chat, click on Chat with Us; to try to speak to Turbo Tax on the phone, click on Call Us.  Note the estimated wait time listed above the Chat with Us.

  • For the Question or Issue, enter:

    I need Form 8911 to file my taxes but you don't have it installed; please add this form so that I can e-file my taxes.

    Enter your First Name, Last Name and E-mail Address, the last one twice if necessary, into the boxes provided.

  • Click Chat Now or Get Phone Number button.

  • If you selected Chat, a window will pop up where you can describe the problem in more detail with a Turbo Tax agent and express your desire for them to add this form to the program.

  • If you selected Phone, a page will open with a phone number and a reference number.  Dial the number on your phone and then enter the reference number when prompted.  When you get through, describe the problem in more detail with the Turbo Tax agent and express your desire for them to add this form to the program.

What laws govern the EVSE Tax Credit?

The EVSE Tax Credit is covered in Title 26, Subtitle A, Chapter 1, Subchapter A, Part IV, Subpart B, Section 30C of the U.S. legal code.  Paragraph (a) sets the base credit at 30% of the cost for the EVSE, Paragraph (b)(2) limits the credit to $1,000 for individuals and Paragraph (c)(2)(C) specifics that EVSE qualifies for it: Electricity.  Paragraph (d)(2) is the part where regular tax with credits is compared to AMT before credits, causing all the unhappiness mentioned above.  Of course, in 2010, you were able to declare 50% of the value up to $2,000; this comes from Section (e)(6) which adds an exception for EVSEs installed in calendar years 2009 and 2010.  Specifically, Section (e)(6)(A)(i) is what sets the limit to 50% and Section (e)(6)(A)(iii) is what sets the maximum to $2,000.  Finally, Section (g)(2) sets this tax credit for EVSEs to expire on 31 December 2010… or at least, that was the case until 17 December 2010.

The future of the EVSE Tax Credit

On 17 December 2010, President Barak Obama signed H.R. 4853 into law.  This omnibus tax bill, a compromise between Democrats and Republicans, had, slipped within its copious pages, a stay of execution for the EVSE tax credit.  Specifically, if you read the full text of the bill, you'll see that Section 711 specifically states:

Sec. 711. Alternative Fuel Vehicle Refueling Property.

  1. Extension of Credit.—Paragraph (2) of section 30C(g) is amended by striking ‘‘December 31, 2010’’ and inserting ‘‘December 31, 2011.’’.

  2. Effective Date.—The amendment made by this section shall apply to property placed in service after December 31, 2010.

In other words, as of 1 January 2011, Section (g)(2) now allows this credit under the prior 30% / $1,000 rules for EVSEs placed in service in calendar year 2011.

Why was the credit reduced to 30% with a $1,000 maximum

Technically, the EVSE credit wasn't reduced.  The 50% / $2,000 limits were specific adjustments to the 2009 and 2010 tax years.  As of 2011, we go back to the old limits of 30% / $1,000 maximum.  Not the best of options, but at least the credit was extended.