Individuals and businesses who buy
a brand new hybrid, electric or diesel fuel vehicle can
take advantage of the “Alternative Motor Vehicle
Credit.” This tax credit applies to new cars and trucks
that are certified for the credit by the IRS.
Alternative
Motor Vehicle Tax Credit Qualifying vehicles
purchased on or after January 1, 2006, will be eligible
for a tax credit ranging from $400 to $4,000 based on
fuel economy. The alternative motor vehicle tax credit
is actually a combination of two separate tax credits.
The math is complicated, and fortunately you won’t have
to calculate it. The car manufacturers and the IRS will
certify the tax credit amount of qualifying
vehicles.
Phaseout of
the Alternative Motor Vehicle Tax Credit The
alternative motor vehicle tax credit may be short-lived,
depending on consumer demand for the new cars powered by
fuel-efficient hybrid, electric, and clean diesel
motors. Most of the cars certified for the credit are
hybrid cars. But the credit is also available for
electric vehicles and diesel cars using advanced
lean-burn technology. The dollar value of the tax credit
will start to be reduced once a manufacturer sells
60,000 qualifying vehicles. The phaseout occurs at the
manufacturer level. So popular brands may see their tax
credits reduced sooner than less popular brands. Here
are the time periods and dollar amounts for alternative
motor vehicle tax credit.
“Taxpayers may claim the
full amount of the allowable credit up to the end of the
first calendar quarter after the quarter in which the
manufacturer records its sale of the 60,000th vehicle.
For the second and third calendar quarters after the
quarter in which the 60,000th vehicle is sold, taxpayers
may claim 50 percent of the credit. For the fourth and
fifth calendar quarters, taxpayers may claim 25 percent
of the credit. No credit is allowed after the fifth
quarter.” — Per the IRS
How Will You
Know What the Tax Credit Amount Is? The IRS
has certified various makes and models for the hybrid
credit. These certifications indicate the maximum dollar
value that your tax credit will be. Your alternative
motor vehicle tax credit may be reduced by various
limitations.
Under guidance released by
the IRS, car manufacturers can issue you a written
certification specifying the dollar amount of your
hybrid tax credit.
Tax Credit
for 2009 Diesel Cars Five diesel-powered
vehicles are eligible for the alternative motor vehicle
tax credit. The IRS has made this tax credit available
for diesel cars using advanced lean-burn technology.
Already the IRS has certified several hybrid and
electric vehicles for the credit. The newly certified
diesel vehicles are:
* Mercedes GL 320 Bluetec:
$1,800 * Mercedes ML 320 Bluetec: $900 * Mercedes
R 320 Bluetec: $1,550 * Volkswagen Jetta 2.0L TDI
sedan: $1,300 * Volkswagen Jetta 2.0L TDI SportWagen:
$1,300 Qualifying Vehicles With No Model Year
Specified * Mercedes GL 320 Bluetec: $1,800 * Mercedes
ML 320 Bluetec: $900 * Mercedes R 320 Bluetec:
$1,550
You will notice that
several 2005 models are certified for the hybrid tax
credit. If you bought a 2005 hybrid on or before
December 31, 2005, you qualify for the clean fuel
deduction, but not for the new hybrid credit. However,
if you bought a 2005 hybrid on or after January 1, 2006,
you will qualify for the new hybrid credit but not for
the old clean fuel deduction.
