Alternative Vehicle Fuel Credit

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

2009 Qualifying Vehicles
* 2009 Ford Escape Hybrid 2WD: $3,000
* 2009 Ford Escape Hybrid 4WD: $1,950
* 2009 Mercury Mariner Hybrid 2WD: $3,000
* 2009 Mercury Mariner Hybrid 4WD: $1,950
* 2009 Volkswagen Jetta 2.0L TDI sedan: $1,300
* 2009 Volkswagen Jetta 2.0L TDI SportWagen: $1,300

2008 Hybrid Models
* 2008 Chevrolet Malibu Hybrid: $1,300
* 2008 Chevrolet Tahoe Hybrid (2WD and 4WD): $2,200
* 2008 Ford Escape 2WD Hybrid: $3,000
* 2008 Ford Escape 4WD Hybrid: $2,200
* 2008 GMC Yukon Hybrid (2WD and 4WD): $2,200
* 2008 Honda Civic GX compressed natural gas vehicle: $4,000
* 2008 Honda Civic Hybrid CVT: $2,100
* 2008 Lexus LS 600h L Hybrid: $450
* 2008 Lexus RX 400h 2WD and 4WD: $550
* 2008 Mazda Tribute 2WD Hybrid: $3,000
* 2008 Mazda Tribute 4WD Hybrid: $2,200
* 2008 Mercury Mariner 2WD Hybrid: $3,000
* 2008 Mercury Mariner 4WD Hybrid: $2,200
* 2008 Nissan Altima Hybrid: $2,350
* 2008 Saturn Aura Hybrid: $1,300
* 2008 Saturn Vue Green Line: $1,550
* 2008 Toyota Camry Hybrid: $650
* 2008 Toyota Highlander Hybrid 4WD: $650
* 2008 Toyota Prius: $787.50

2007 Hybrid Models
* 2007 Chevrolet Silverado (2WD): $250
* 2007 Chevrolet Silverado (4WD): $650
* 2007 Ford Escape 4 WD Hybrid: $1,950
* 2007 Ford Escape Front WD Hybrid: $2,600
* 2007 GMC Sierra (2WD): $250
* 2007 GMC Sierra (4WD): $650
* 2007 Honda Accord Hybrid AT: $1,300
* 2007 Honda Accord Hybrid Navi AT: $1,300
* 2007 Honda Civic GX compressed natural gas vehicle: $4,000
* 2007 Honda Civic Hybrid CVT: $2,100
* 2007 Lexus GS 450h: $1,550
* 2007 Lexus RX 400h 2WD and 4WD: $2,200
* 2007 Mercury Mariner 4 WD Hybrid: $1,950
* 2007 Nissan Altima Hybrid: $2,350
* 2007 Saturn Aura Green Line: $1,300
* 2007 Saturn Vue Green Line: $650
* 2007 Toyota Camry Hybrid: $2,600
* 2007 Toyota Highlander Hybrid 2WD and 4WD: $2,600
* 2007 Toyota Prius: $3,150

2006 Hybrid Models
* 2006 Chevrolet Silverado (2WD): $250
* 2006 Chevrolet Silverado (4WD): $650
* 2006 Ford Escape Hybrid 4 WD: $1,950
* 2006 Ford Escape Hybrid Front WD: $2,600
* 2006 GMC Sierra (2WD): $250
* 2006 GMC Sierra (4WD): $650
* 2006 Honda Accord Hybrid AT: $1,300 (without updated control calibration qualifies for a credit amount of $650)
* 2006 Honda Civic GX compressed natural gas vehicle: $4,000
* 2006 Honda Civic Hybrid CVT: $2,100
* 2006 Honda Insight CVT: $1,450
* 2006 Lexus RX400h 2WD: $2,200
* 2006 Lexus RX400h 4WD: $2,200
* 2006 Mercury Mariner Hybrid 4 WD: $1,950
* 2006 Toyota Highlander 2WD Hybrid: $2,600
* 2006 Toyota Highlander 4WD Hybrid: $2,600
* 2006 Toyota Prius: $3,150

2005 Hybrid Models
* 2005 Ford Escape 2WD Hybrid: $2,600
* 2005 Ford Escape 4WD Hybrid: $1,950
* 2005 Honda Accord Hybrid AT: $650
* 2005 Honda Civic GX compressed natural gas vehicle: $4,000
* 2005 Honda Civic Hybrid (SULEV) CVT: $1,700
* 2005 Honda Civic Hybrid (SULEV) MT: $1,700
* 2005 Honda Insight CVT: $1,450
* 2005 Toyota Prius: $3,150

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.