Federal tax credits have phased out for hybrid and clean-diesel automobiles, but did you know that state tax credits for buying those same vehicles live on in South Carolina?
For some who bought a qualifying new vehicle in 2011, the provision could be worth more than $600.
South Carolina's "alternative motor vehicle credit" has been around for five tax years and has no expiration date. But it appears to be little-known, even among those in the new-car industry. Just 246 tax filers claimed the credit in 2009, according to the most recent state data available.
The credit may get overlooked because the provision is written in a complicated and seemingly contradictory way, as it's based on a federal tax credit that in many cases is no longer available.
The way it all boils down is this: If you bought a new car in South Carolina last year, and if that make and model was ever eligible for the relevant federal credit, South Carolina will give you a tax credit equal to 20 percent of what used to be the maximum federal credit.
A little background: The federal tax credits were part of the Energy Policy Act of 2005 and were available for hybrid, fuel cell, alternative fuel (usually compressed natural gas) and advanced lean-burn (high-efficiency diesel) vehicles.
The tax credits were meant to encourage sales of new models with cutting-edge energy-saving technology. The credits phased out for different makes and models as certain levels of sales were reached. In any case, vehicles had to be purchased by the end of 2010 to qualify, and the federal credits under that program are now gone.
In South Carolina, the Legislature passed a companion measure in 2005 that provided for a state credit equal to 20 percent of the federal credit.
However -- and this is the key part -- the legislation specifically stated that the state tax credits would continue "without regard to the federal phaseout limits of Internal Revenue Code," and the IRS provisions would be "considered permanent" when calculating the state credit.
That means that any vehicle that ever qualified for the federal tax break still qualifies for the state credit, so long as it was purchased new.
For example, to get a full $3,400 federal tax credit, you would have had to buy a new Ford Fusion hybrid by April 1, 2009. But in South Carolina, you can still get 20 percent of the full federal amount, or $680, if you bought the same car last year.
The full $3,150 federal tax credit for buying a Toyota Prius phased out even earlier in September 2006, but the tax credit survives in South Carolina at 20 percent of the original federal maximum: $630.
You also can get a South Carolina tax credit if in 2011 you bought a new hybrid version of a Toyota Camry, Honda Civic, Ford Escape, Lexus RX400, Mercedes ML 450, BMW X6 or 750i, Cadillac Escalade, Chevy Tahoe or Silverado, GMC Sierra or Yukon, Nissan Altima, Porsche Cayenne. And the list goes on.
Search online for "Internal Revenue Code Section 30B" and you'll find the eligible models. The S.C. Department of Revenue says it has no list of its own.
The South Carolina credit also is available for lean-burn vehicles, which include many Audi, BMW, Mercedes and Volkswagen diesel models. The Audi and Volkswagen "TDI" models are on the list, along with Mercedes "Bluetec" models.
The lean-burn credits are generally not as large as those for hybrids. For 2011 model years, the state credit would range from $180 for a VW Touareg TDI or a Mercedes ML350 Bluetec and up to $360 for a BMW X5 xDrive 35D.
And if you're one of the rare buyers of a Honda Civic FCX Clarity fuel cell model or a Honda Civic GX natural gas model, you're also due for a state tax credit.
The tax credit is claimed on Line 5 of the tax credit worksheet, SC1040TC. Free tax forms are available online at sctax.org.
The federal government continues to offer a tax credit of up to $7,500 for plug-in electric vehicles. South Carolina's credit for plug-ins was repealed after the 2010 tax year.