A few years ago a “hybrid vehicle” would qualify the owner for an income tax credit and give the owner authorization to drive in the carpool lane without a passenger, without fear of getting a ticket.

Current Tax Benefits

But now in 2013, in order to get both of these favorable benefits, the owner of the car must buy an “alternative fuel” vehicle.  While several cars can be classified as “alternative fuel” vehicles, I will focus my comments on plug-in vehicles and full electric vehicles. The owner of either car would get a federal income tax credit of up to $7,500 (https://www.irs.gov/pub/irs-pdf/f8911.pdf) and would also qualify for additional credits in California. The owner would also get rights to travel in the carpool lane.

Refueling Demand

But as most people know, the big problem with these cars is range anxiety. These cars must have the electricity recharged before hitting the maximum miles driven for that type of vehicle. Unlike a traditional combustible car engine that can be refueled in 5 to 10 minutes, it takes many hours to recharge these types of vehicles.

Some businesses, real estate owners, and supermarkets have installed Alternative Fuel Vehicle Refueling Property on the business premises to respond to the demands from employees and/or customers. For instance near our office, a supermarket has reserved two spots for electric cars. It has 120 Volt refueling property, which would recharge the battery of a Toyota Prius plug-in in about  3 hours. The Chevy Volt would require about 10 hours to recharge the battery.  The Tesla Model S would take more than 24 hours to recharge based on the 120 Volt systems. Not many customers of the supermarket will shop for this long, but this would help greatly for employees who park their car all day.

Congress several years ago enacted legislation which gives a business owner a credit of the smaller of 30% of the cost of depreciable refueling property or $30,000. The amount of the tax basis for the depreciable property must be reduced by the credit claimed. There are also several other requirements that must be considered before claiming the credit.

If the refueling property is instead installed in your home, then you would qualify for a $1,000 credit.

New Technology…New Benefits?

As the sales of plug-in vehicles and electric vehicles continue to increase, the need for quick and efficient charging sites will likely grow. I recently read about an idea in this area that is being developed by Qualcomm and a private company named  ChargeMaster. The Qualcomm Halo eliminates the need to plug in electric cars into a power source. Instead a wireless system allows electricity to jump between two Qualcomm plates- one in the car’s chassis and one on the ground underneath.  The plates contain a coiled wire that creates a magnetic field across which the current flows. Each plate is roughly the size of a standard piece of paper and one inch thick, making them relatively easy to incorporate into a vehicle or to bury in the ground.

As technology changes, I would expect Congress to change the tax credits available much like what happened with hybrids where the tax credits were phased out after a few years. Before your business decides to purchase an Alternative Fuel Vehicle Refueling Property, you should talk to your CPA about the tax benefits you may receive.