Alternative Motor Vehicle Credit

The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles:
Qualified Hybrid Vehicles,
Qualified Fuel Cell Vehicles,
Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrids, and
Advanced Lean-Burn Technology Vehicles.
The amount of the potential credit varies by type of vehicle and which of the four credits applies.
Internal Revenue Code Section 30B provides for the Alternative Motor Vehicle Credit. Notice 2006-9 provides procedures for manufacturers to certify passenger auto and light trucks as Qualified Hybrid Vehicles and Advance Lean Burn Vehicles and Notice 2007-46 provides procedures for heavy hybrid vehicles. Notice 2006-54 provides procedures for manufacturers to certify vehicles as Qualified Alternative Fuel Motor Vehicles (QAFMV). Notice 2008-33 provides procedures for manufacturers to certify Fuel Cell Vehicles.
Each of the four credits under the Alternative Motor Vehicle Credit is addressed individually below.
Qualified Hybrid VehiclesHybrid vehicles are a combination of gasoline and electric engines. These vehicles have drive trains powered by both internal combustion engine and a rechargeable battery.Generally for qualified hybrids, a taxpayer may rely on the manufacturer’s certification that a specific make, model and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. 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 hybrid passenger automobile or light truck or advance lean burn technology motor 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.
Qualified Fuel Cell VehiclesA qualified fuel cell motor vehicle is a vehicle that is propelled by power derived from one or more cells which convert chemical energy directly into electricity.The base amount of the new qualified fuel cell motor vehicle credit varies with the gross vehicle weight rating of the vehicle. Passenger automobiles and light trucks are eligible for an additional fuel economy amount that varies with the rated fuel economy of a qualifying vehicle. A list of qualifying cell vehicles is available.
Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy HybridsFor alternative fueled light and heavy duty vehicles to meet the requirements of QAFMV, the vehicles may be either new, original equipment installation vehicles or prior use vehicles that are converted to use an alternative fuel by an aftermarket installer. Qualified alternative fuel includes compressed natural gas, liquefied natural gas, liquefied petroleum gas (propane) and hydrogen. The vehicles may also operate on certain mixed fuels such as liquefied propane gas or liquefied natural gas and gasoline. For a list of qualified QAFMV see Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrid Vehicles.
Advanced Lean-Burn Technology VehiclesAdvanced Lean-Burn Vehicles are passenger cars or light trucks with an internal combustion engine designed to operate primarily using more air than is necessary for complete combustion of the fuel. The vehicles must also incorporate direct fuel injection technology and achieve at least 125 percent of the 2002 model year city fuel economy rating.
Available credit amounts may vary and include a base credit amount based on fuel economy compared to the 2002 model year city fuel economy rating and an additional amount based on the vehicle’s lifetime fuel savings.
See Advanced Lean-Burn Technology Vehicles for the list of certified qualifying vehicles

10 Important Facts about the Extended First-Time Homebuyer Credit

IRS Special Edition Tax Tip 2009-13
If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.
Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.
You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.
If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.
People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.
No credit is available if the purchase price of the home exceeds $800,000.
The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
A dependent is not eligible to claim the credit.
For more information about the expanded First-Time Homebuyer Credit, visit www.IRS.gov/recovery

First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify

IR-2009-108, Nov. 24, 2009
WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.
The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.
The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.
But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.
A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
Income Limits Rise
The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
New Requirements
Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:
Dependents are not eligible to claim the credit.
No credit is available if the purchase price of a home is more than $800,000.
A purchaser must be at least 18 years of age on the date of purchase.
For Members of the Military
Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.
For more details on the credit, visit the First-Time Homebuyer Credit page on IRS.gov.

5 New Investing Rules for Retirement

by Katy Marquardt Monday, January 12, 2009


Many of the old rules for retirement investing no longer apply. Facing longer life spans, increasing healthcare costs, and a market in crisis, retirees will need more growth in their portfolios during the coming years and decades. At the same time, they need the assurance that a 37 percent market drop--as we saw in 2008--won't completely devastate their remaining nest egg. A growing number of financial planners are rethinking the conventional wisdom. (Remember the old adage that you should subtract your age from 100, and devote that percentage of your portfolio to stocks?) Here are five new rules to consider:
Separate your investments into different pots. Often, investors in retirement lump all of their money together, with which they pursue one strategy, says Eric Bailey, managing principal of Captrust Advisers in Tampa. His firm, which works with pensions, endowments, and high net-worth individuals, takes an approach ripped straight from the institutional investors' playbook. Clients' money is separated into three categories: Short-term funds reside in very low-risk investments, such as high-quality bonds; intermediate-term money goes in a balanced mix of stocks and bonds--such as a 50-50 or 60-40 split; and long-term investments starting with five-year time horizons are heavier on stocks. "This way, you can take advantage of a market sell-off with your long-term investments and you'll avoid needing to liquidate investments when stocks are down," Bailey says.
Don't reach too far for yield. Cash may be king in this market, but decent yields are hard to find. Treasuries present the ultimate in safety, but the pay is meager: The one-year bill currently yields just 1.1 percent and the five-year 2.2 percent. Unfortunately, if you're looking for a bigger payout, you'll have to take on some risk. Says Oliver Tutt, managing director of Newport, R.I.-based Randall Financial Group: "You'll have to make a trade-off somewhere, particularly if you're dealing with large amounts of money." Stick with quality: If you're considering a bond fund, for example, be sure to look under the hood at its various holdings and review the fund's prospectus to see what types of bonds--and credit ratings--it targets. "Quality is always important, but more than ever it is now," says Bill Walsh, chief executive officer of Hennion & Walsh, an asset management firm based in Parsippany, N.J. "Know what you're buying."
Make it a muni. Government bonds are airtight when it comes to safety, but their yields are near all-time lows. As an alternative for retired investors in the upper tax brackets, municipal bonds are worth considering. With munis, investors get the benefit of tax-free income, less volatility than corporate bonds, and, theoretically, more safety. "Right now, there's more value in munis than almost every other area. But be sure you know the issuer," says Walsh. Among munis, he recommends high-grade, general-obligation bonds and essential-purpose bonds such as the sewer authority. "Stay away from things like nursing home bonds, which could go out of business," he says. Walsh prefers single-issue bonds over bond funds, which "will work, but you have to be careful," because there is no set maturity date, no set yield, and managers can sometimes buy outside of that asset class.
Go for dividends. It's a no-brainer that quality matters in a market like this. But how do you know if a stock is "quality"? Dividends are one indicator. That's because dividend income--which is essentially a portion of company profits paid out to shareholders--helps offset fluctuations in a stock's share price, creating a cushion during turbulent markets. "During trying times, dividend-paying stocks tend to do well," says Paul Alan Davis, portfolio manager of the Schwab Dividend Equity Fund. Davis also looks for companies on solid footing, which have plenty of cash and aren't in "financial straits." During the first 11 months of year, Davis says, the S&P's dividend-paying stocks fell by roughly 36 percent; meanwhile, nondividend payers were down about 45 percent. You'll find those dividend payers in more developed industries such as consumer staples, utilities, and healthcare. Examples include Philip Morris, Coca-Cola, General Mills, Bristol-Myers Squibb, and Pfizer.
Consider "alternatives": This asset class, which is used most often by pensions and other institutional investors, runs the spectrum from commodities and annuities to real estate. But individual investors can also use them to dramatically reduce volatility in their portfolios, says Gary Hager, founder and chief executive of Integrated Wealth Management in Edison, N.J. He likes real estate investment trusts, or REITs, which have historically provided a smooth ride for investors. A sample portfolio from 1978 through 2007 shows that putting 10 percent of equity holdings in U.S. REITs improved returns by 0.3 percent and cut volatility by 0.9 percent, compared with investing in stocks alone, according to The Only Guide to Alternative Investments You'll Ever Need: The Good, the Flawed, the Bad, and the Ugly. Other alternative investments to consider include commodities and inflation-protected securities, both of which are offered in ETF form.



Copyrighted, U.S.News & World Report, L.P. All rights reserved.

New car tax break still available

The "cash for clunkers" program ended abruptly on
Monday, August 24. The program, which provided up to
$4,500 to those who traded in their old cars for more
energy-efficient new ones, was so successful that the
$3 billion in government funding was depleted long
before the original November 1 deadline.

If you're in the market for a new car, the IRS wants
you to know there is still a tax break that may get you
motivated to make your purchase this year.

Recent legislation provides an above-the-line tax
deduction for the state and local sales and excise
taxes paid on up to $49,500 of the purchase price of a
qualified new car, light truck, motorcycle, or motor
home. The IRS issued a clarification stating that other
fees or taxes based on the vehicle's sales price may be
deductible in states that have no sales tax.

To qualify for the deduction on your 2009 tax return,
the vehicle must have been purchased after February 16,
2009, and before January 1, 2010. The deduction is
phased out for taxpayers whose adjusted gross income
falls between $125,000 and $135,000 (single) or
$250,000 and $260,000 (joint).

Use tax breaks to offset college expenses

The IRS has published facts about the tax deduction for
tuition and fees that is available to help parents and
students pay for post-secondary education. If you're
facing college expenses this fall, here's what the IRS
wants you to know.

* The deduction is up to $4,000 for single filers with
adjusted gross income (AGI) of $65,000 or less and
joint filers with an AGI of $130,000 or less. If
income exceeds these amounts, the deduction drops to
a maximum of $2,000 for an AGI up to $80,000 for
single filers and $160,000 for joint filers. No
deduction is allowed over these income thresholds.

* The deduction is "above the line," so you don't have
to itemize to benefit.

* You can't take the deduction if your filing status is
married filing separately.

Tax Credits for Electric Vehicles Under the American Recovery and Reinvestment Act

The law allows for tax credits for 2 types of plug-in electric vehicles. They are:

Plug-In Electric Drive Vehicle Credit - this is a tax credit for vehicles with 4 or more wheels and a gross vehicle weight of under 14,000 pounds that draws propulsion from a battery with at least four kilowatt hours that can recharged from an external source of electricity, hence the term "plug-in". The amount of the credit ranges from $2,500 to $7,500 depending on the battery capacity. This credit is for qualified vehicles purchased after Dec 31, 2009 and will be reduced for manufacturers after they have sold 200,000 vehicles.

Plug-In Electric Vehicle Credit - this credit applies to two types of vehicles, certain low-speed electric vehicles and two or three wheeled vehicles. Qualified vehicles are those with an electric motor that draws electricity from a battery with a capacity of 4 kilowatt hours or more or be a two or three wheeled vehicle propelled by an electric motor from a battery with a capacity of 2.5 kilowatt hours. The amount of credit is 10% of the purchase price of the vehicle up to maximum of $2,500. Purchases must be made between Feb. 27, 2009 and Jan. 1, 2012 and cannot be claimed if the plug-in electric drive vehicle credit is allowable.

One other credit available is for:

Conversion Kits - this credit is for plug-in electric drive conversion kits. The amount of the credit is 10% of the cost of converting the vehicle to a plug-in electric vehicle. The vehicle must be placed in service after Feb. 17, 2009 and before Dec. 31, 2011.

Energy Incentives in the American Recovery and Reinvestment Act

This new law provides numerous incentives for individuals to invest in energy efficient products for their homes such as insulation, energy efficient windows, and energy efficient heating and air conditioning units. The act currently provides for a 30% tax credit for qualified products up to maximum credit of $1,500. This limit is in effect for years 2009 and 2010.

Other provisions of the Act allow a tax credit for various alternative energy equipment such as solar hot water heaters, geothermal heat pumps, and wind turbines. The credit for this equipment is 30% of the cost of the equipment.

Sales tax deduction allowed for more than 1 vehicle

The IRS is allowing a sales tax deduction for more than 1 vehicle this year. The deduction is normally allowed on the first $49,500 of the cost of a vehicle but the IRS will now allow this deduction for multiple vehicles. So, if you purchase 2 vehicles for $35,000 each you can deduct the total sales tax for both vehicles. This rule is in effect for the period Feb. 16, 2009 through Dec. 31, 2009.