Tax Credit for Carpooling to Work

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Specific types of cars qualify as energy-efficient.
Specific types of cars qualify as energy-efficient.

When gas prices are high, carpooling can be a more cost effective way to commute to work than traveling alone. Carpooling also saves gas and reduces greenhouse emissions. While there is no tax credit for carpooling specifically, tax payers who carpool using an energy-efficient vehicle may qualify to receive a tax credit. Carpooling may have some other tax benefits, however.

  1. Carpooling

    • Carpooling has become more popular as gas prices rise and ecological concerns increase. Any vehicle used for commuting purposes that transports two or more persons can be classified as a carpool vehicle. Carpool occupants often work at the same place, but may also work in close proximity at different business establishments. Vanpools, another form of carpooling, usually consist of a larger group of people commuting a relatively long distance for work, while sharing transportation such as a van or SUV.

    Reinvestment Act

    • In 2009, the U.S. government implemented the American Recovery and Reinvestment Act, designed to spur the economy, create jobs and increase government transparency and accountability in spending. Part of the act included the Investment Tax Credit, which provides incentives for businesses and individuals to use energy-efficient technology. Because of this, taxpayers and businesses that invest in or purchase such technology, like that used in an electric car, can reduce their federal income taxes.

    Qualifications

    • To receive a tax credit for carpooling with an electric car, taxpayers and their vehicle must meet specific requirements. The vehicle being used must have been purchased in or after 2010 and must be purchased brand new from a manufacturer. The amount of credit received is determined by the battery capacity of the car. Some of the cars that meet government specifications include the Nissan Leaf and Smart car, both of which can qualify for the maximum credit of $7,500. For further information about vehicle qualifications, taxpayers should contact the IRS.

    Claiming and Other Tax Benefits

    • Tax credits are generally more beneficial than tax deductions, because they reduce tax liability dollar for dollar -- ensuring the minimum tax payment. Individuals who qualify to claim the tax credit for carpool use of their own car can file a form 8936, or Qualified Plug-in Electric Drive Motor Vehicle Credit form, with their tax return. Businesses claiming the credit for use of a company vehicle should submit a Form 3800 as part of the General Business Credit. Although there are no tax credits simply for carpooling at the time of publication, there are some tax benefits for carpooling. Benefits paid by employers to subsidize carpooling and vanpooling can be excluded from the employees' gross income in many states, as long as the benefits are provided in addition to regular compensation. Employers also often receive a tax benefit for doing so. Workers who park at a facility before carpooling may be able to receive a tax benefit to cover parking fees -- which is tax-deductible for employers.

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