Funding an Alternative Fuel Vehicle
Most alternative fuel vehicles (AFVs) currently cost more than conventional gasoline-fueled vehicles.
To offset the additional costs, various governmental agencies and some utility companies offer tax credits, tax deductions and incentives to the purchasers of AFVs.
EPA allows for a maximum of up to $2,000 as a federal tax deduction for clean-fuel vehicles that use clean fuels such as ethanol, methanol, natural gas or propane (liquefied petroleum gas or LPG). The federal tax deduction is based on the incremental cost of equipping the vehicle to use the clean fuel, the amount above the price of a conventional gasoline-only fueled vehicle. The federal deduction is available for vehicles placed into service after June 30, 1993, and before January 1, 2005.
SOME OTHER PROVISIONS OF THE FEDERAL LAW ARE:
- A $5,000 tax deduction is available for alternatively-fueled trucks or vans weighing between 10,000 and 26,000 pounds.
- A $50,000 tax deduction is available for alternatively-fueled trucks or vans weighing more than 26,000 pounds, or for buses that can seat at least 20 passengers.
- The tax deduction is available for vehicles placed into service after June 30, 1993, and before January 1, 2005.
- A tax deduction of up to $100,000 can be claimed for clean fuel refueling sites (including electricity). The tax deduction is available on sites placed into service after June 30, 1993, and before January 1, 2005.
For information on the federal tax credits or deductions, contact your local Internal Revenue Service Office.
In addition, many States offer incentives for AFV's. Following is a an overview of Alternative Fuel Incentives courtesy of the U. S. Department of Energy Grants:
18 states offer grants
- grants are the most commonly used and most desired form of incentive
- most are available to both public and private entities
- consumers are often confident they will receive grant funds at the time of purchase
- 21 states offer tax incentives
- not as popular as grants
- tax incentives do not help municipalities, state governments, and municipal utilities-these fleets represent a majority of the AFV population
- tax deductions are of limited use to small business fleets with low net income
Fuel Price/Tax Deductions
3 states offer fuel price/tax and sales tax discounts or exemptions
- fuel price discounts encourage fuel use rather than vehicle purchases
- tax reductions for fuel have a long payback period and do not result in enough of a price discount to attract a new market.
- 29 states offer loans; 16 are specific to ethanol and E85
- loans are powerful but can be less effective than tax deductions and credits
- loan programs are more effective if they have dedicated personnel to manage them
- loans are more useful to fleets in areas with high price differentials between alternative fuel and gasoline or diesel to make the economics attractive
- many states include high occupancy vehicle (HOV) lane access and preferential parking
- five states allow HOV lane access to AFVs with less than the required occupants
- non-financial incentives can be particularly attractive to private fleets, but often require additional vehicle identification, such as decals or special license plates.
- include incentives for the resale of AFVs-as of April, 28, 2000, Arizona is the only state to exempt sales of used alternative fuel vehicles from the state's transaction privilege and use tax
Contact your local Clean Cities Coordinator for additional information.