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Plug-In Electric

Electric Vehicle Tax Credits and Roth Conversions for Retirement Plans

11 February

Plug-in Electric 2- and 3-Wheeled Vehicles [IRC §30D(g)]

Under prior law, the Electric Vehicle Credit for low-speed vehicles, motorcycles, and 3-wheeled vehicles under IRC section 30 expired for vehicles acquired after 2011. Likewise, the Electric Vehicle Conversion Kit Credit under IRC section 30B(i) expired for conversions made after December 31, 2011.

New Law: The new law reforms and extends for two years, through the end of 2013, the tax credit for highway-capable plug-in motorcycles and 3-wheeled vehicles. The new law replaces the 10% tax credit that expired at the end of 2011 for plug-in electric motorcycles, 3-wheeled vehicles and low-speed vehicles. Thus, the new law repeals the ability for golf carts and other low-speed vehicles to qualify for the credit.

The new credit amount is the lesser of 10% of the cost of the qualified 2- or 3-wheeled plug-in electric vehicle, or $2,500. A qualified 2- or 3-wheeled plug-in electric vehicle means any vehicle which:

  • Has 2 or 3 wheels (cannot be 1, 4, or 18 wheels, etc.),
  • The vehicle is purchased new (original use by taxpayer),
  • The vehicle is acquired for use or lease by the taxpayer and not for resale,
  • The vehicle must be made by a manufacturer (not a homemade vehicle),
  • Gross vehicle weight must be less than 14,000 pounds,
  • The vehicle must be propelled to a significant extent by an electric motor which draws electricity from a battery which (1) has a capacity of not less than 2.5 kilowatt hours, and (2) is capable of being recharged from an external source of electricity (such as being plugged into a home electrical outlet),
  • The vehicle is manufactured primarily for use on public streets, roads, and highways (has to be street legal)
  • The vehicle is capable of achieving a speed of 45 miles per hour or greater, and is acquired after December 31, 2011 and before January 1, 2014.

Roth Conversions for Retirement Plans

Under current law, a deferral plan under section 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan can have Roth accounts that allow participants to save on a Roth basis. That is, they can make after-tax contributions to the plan and all the principal and earnings are tax free when distributed. Plans can currently allow participants to convert their pre-tax accounts to Roth accounts, but only with respect to money they have a right to take out of the plan, usually because they have reached age 59½ or separated from service. The new law allows any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable. The amount converted would be subject to regular income tax under the Roth conversion rules.

Disclaimer: Electrical Distributor Consulting is not a law firm, CPA, or affiliated with the IRS. We are Electrical Distributors sharing our knowledge and experience to help improve distributors looking to go to the next step. Please seek the advice of your local professional to see how these tax code changes may affect you.

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