The Internal Revenue Service (IRS) has published initial guidance on claiming a federal tax credit for the purchase of certain fuel-efficient vehicles. The guidance applies to both the “new advanced lean burn technology motor vehicle credit” and the “qualified hybrid motor vehicle credit.” The allowed tax credit of up to $3,400 for buyers is a result of the Energy Policy Act of 2005. The new IRS guidance allows manufacturers to certify the vehicles’ eligibility for the credit and the amount of the credit that the buyers are entitled to. This certification shifts the burden from the purchaser to the manufacturer and should make claiming the credit easier for purchasers.
The new tax credit stops after the manufacturer sells 60,000 eligible vehicles. The vehicle count began on January 1, 2006. The IRS clarified in Notice 2006-9 that buyers can claim the tax credit until the end of the first calendar quarter after the quarter in which the manufacturer reaches 60,000 sales.
The new credit replaces a tax deduction of up to $2,000,that the IRS formerly allowed taxpayers to take as an adjustment to income on line 36 of Form 1040.
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