New Energy Tax Credits For Alternative Fuel Vehicles

Qualifying alternative fuel vehicles (AFVs) purchased or placed into service between January 1, 2005 and December 31, 2010 may be eligible for a federal income tax credit of up to $4,000.

Vehicles placed into service before January 1, 2005 may be eligible for a $2,000 clean-fuel vehicle tax deduction.

Alternative Fuels

To be eligible for this tax credit, the vehicle must only be capable of operating on any of the following alternative fuels:

  • Compressed natural gas (CNG)
  • Liquefied natural gas (LNG)
  • Liquefied petroleum gas (LPG)
  • Hydrogen
  • Any liquid at least 85% methanol by volume

Additional Requirements

Additional vehicle requirements:

  • It’s original use commences with the taxpayer.

  • It is acquired for use or lease by the taxpayer, and not for resale. (The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.)

  • It is used mostly in the United States.

IRS has yet to provide guidance on using credits to reduce alternative minimum tax liability and rules relating to recapture of credit (e.g., if the vehicle is re-sold).

Claiming the Credit

Fill out Form 8910, Alternative Motor Vehicle Credit.

For AFVs acquired for personal use, report the credit from Form 8910 on the appropriate line of your Form 1040, U.S. Individual Income Tax Return

Other Tax Incentives

Some state and local governments also provide incentives for AFVs. Check with your state or local government or view the U.S. Department of Energy’s list of State & Federal Incentives & Laws.

AFVs are not eligibe for electric vehicle tax credits.

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