Lee Reams & Associates
Po Box 6768
Malibu, CA 90265
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Ph: 818-338-8700
Fax: 818-740-0550
lee2.reams@clientwhys.com
2010 is the Last Year for the Lean Burn Vehicle Credit
2010 is the final year during which taxpayers can purchase an advanced lean burn technology vehicle and claim a tax credit for the purchase. Unlike the hybrid credit, the lean burn credit is available to vehicles with internal combustion engines that are designed to operate primarily using more air than is necessary for complete combustion of the fuel, incorporate direct injection, and achieve at least 125% of the 2002 model year city fuel economy rating. The table below lists the vehicles currently certified by the IRS as qualifying for the advanced lean burn credit.
If a vehicle is used both for business and personal use, the credits are divided between personal and business use and can be used to offset both the regular and alternative minimum tax. The personal portion is a non-refundable credit, and can only reduce your current year tax to zero; any excess is lost. The business portion becomes part of the general business credit, and unused credits are carried back one year and forward twenty years.
The credit will be phased out starting in the quarter following the one in which the manufacturer records its 60,000th sale of hybrid and lean burn vehicles. Volkswagen Group America (includes Audi vehicles) has already reached that limit; thus, the allowable credits (as shown in the table below) are reduced by 50% for Audi and Volkswagen vehicles purchased for the balance of 2010.
If you are contemplating purchasing a vehicle that qualifies for the advanced lean burn technology tax credit or one that qualifies for the hybrid tax credit, it may be appropriate for you to call this office in advance to see how the credits will or won’t benefit you. This is especially true if you are basing your purchase decision on receiving the credit. Keep in mind that the personal portion of the credit is not refundable and cannot be carried over to another year. Therefore, you may not benefit as much from the credit as the car salesperson might lead you to believe.
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Circular 230 Disclosure, United States Treasury regulations effective June 21, 2005 require us to notify you that to the extent of this communication, or any of its attachments, contains or constitutes advice regarding any U.S. Federal tax issue, such advice is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that can be imposed by the Internal Revenue Service.
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