Monthly Archives July 2007

Alternative fuels are derrived from resources other than petroleum. Some are produced domestically, reducing our dependence on imported oil, and some are derived from renewable sources. Often, they produce less pollution than gasoline or diesel.

To promote alternative fuels, the Federal government offers tax incentives to consumers purchasing qualifying alternative fuel vehicles.

Ethanol is produced domestically from corn and other crops and produces less greenhouse gas emissions than conventional fuels.

Ethanol is an alcohol-based fuel made by fermenting and distilling starch crops, such as corn...

Here you’ll find items of current interest — new programs, recent guidance, or timely reminders. Or jump to the latest news about IRS forms and publications.

IRS Strengthens Withholding Compliance Program

The IRS has stepped up its withholding compliance program by making more effective use of information reported on W-2 wage statements to ensure that employees have enough federal income tax withheld from their paychecks. At the same time, employers are no longer required to submit potentially questionable Forms W-4 to the IRS.

Health Savings Accounts

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created a new, tax-advantaged way for certain people to save for health care expenses...

R-2006-182, Nov. 22, 2006

WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc., that its Honda Civic GX Model Year 2007 vehicle meets the requirements of the Alternative Motor Vehicle Credit.

The qualified Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005. The new credit includes separate credits for four distinct categories: (1) fuel cell vehicles, (2) advanced lean burn technology vehicles, (3) hybrid vehicles and (4) alternative fuel vehicles.

The credit amount for the Honda Civic GX Model Year 2007, which operates solely on compressed natural gas, is $4,000. The credit is equal to a percentage of the incremental cost of the alternative fuel technology.

Alternative fuel vehicles placed into service before 2006 may be eligible for a one-time clean-fuel vehicle tax deduction of up to $2,000!

Vehicles placed in service after 2005 may be eligible for a new energy tax credit of up to $3,400.

Clean-Fuel Vehicles

Clean-fuel vehicles are motor vehicles designed to be propelled by one of the following fuels:

• Natural gas (e.g., CNG)
• Liquified natural gas (LNG)
• Liquified petroleum gas (LPG)
• Hydrogen
• Electricity (e.g., some gasoline/electric hybrids)...

Qualifying alternative fuel vehicles (AFVs) purchased or placed into service between January 1, 2005 and December 31, 2010 may be eligible for a federal income tax credit of up to $4,000.

Vehicles placed into service before January 1, 2005 may be eligible for a $2,000 clean-fuel vehicle tax deduction.

Alternative Fuels

To be eligible for this tax credit, the vehicle must only be capable of operating on any of the following alternative fuels:

• Compressed natural gas (CNG)
• Liquefied natural gas (LNG)
• Liquefied petroleum gas (LPG)
• Hydrogen
• Any liquid at least 85% methanol by volume

Additional Requirements

Additional vehicle requirements:

• It’s ...

A tax deduction reduces the amount of income for which you are taxed. For example, if your taxable income were $50,000, a $2,000 deduction would reduce it to $48,000. So, you would pay taxes on an income of $48,000 instead of $50,000. This means your actual savings would be a fraction of the $2,000 deduction.

A tax credit reduces the total amount of income tax you owe. So, if you owed $10,000 in federal income tax, a $2,000 credit would reduce the amount you owed to $8,000. With a credit, your actual savings would be $2,000.

Vehicle Requirements

To be eligible for the tax credit, a vehicle must meet the following requirements:

It is no accident that the most fuel efficient vehicles in some classes for this model year are hybrid-electric vehicles (HEVs). Hybrids combine the best features of the internal combustion engine with an electric motor, and they can be configured to achieve a variety of different objectives, such as improving fuel economy, boosting performance, or providing electrical power to auxiliary loads such as power tools.

HEVs are primarily propelled by an internal combustion engine, just like conventional vehicles...

Four new hybrids are available for model year 2008:

• Ford Escape Hybrid – Sport utility vehicle equipped with a 4-cylinder engine and continuously variable transmission (CVT), available in front-wheel drive and four-wheel drive
• Mazda Tribute Hybrid – Sport utility vehicle equipped with a 4-cylinder engine and continuously variable transmission (CVT), available in two- and four-wheel drive
• Mercury Mariner Hybrid – Sport utility vehicle equipped with a 4-cylinder engine and continuously variable transmission (CVT), available in front-wheel drive and four-wheel drive
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Hybrid-electric vehicles (HEVs) combine the benefits of gasoline engines and electric motors and can be configured to obtain different objectives, such as improved fuel economy, increased power, or additional auxiliary power for electronic devices and power tools.

Some of the advanced technologies typically used by hybrids include

Regenerative Braking. The electric motor applies resistance to the drivetrain causing the wheels to slow down...