Diesel Cars

Clean Diesel Cars: Qualifying for Tax Breaks


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Interest in clean diesel cars have been on the rise in recent years, and auto manufacturers are increasing the number of diesel car options for the marketplace. The US government, through the Internal Revenue Service (IRS), offers taxpayers incentives to purchase new advanced lean-burn technology vehicles in the form of tax credits.

What is Clean Diesel?

By definition, clean diesel is ultra low sulfur diesel (ULSD) containing 97% less sulfur than regular low sulfur diesel (LSD). Clean diesel benefits the environment as it was made to increase the effectiveness of pollution controls that are negatively affected by sulfur. Retail pumps generally sell ULSD, and while LSD is still sold, diesel cars manufactured after 2007 should only use ULSD. Clean Diesel cars fall into advanced lean-burn vehicle, as they utilize a higher amount of air in the fuel combustion process and have a direct fuel injection system.

How Does the Tax Credit Work?

Consumers who purchase a new qualifying vehicle can claim an auto tax break designated by the IRS on their annual income taxes. The credit can be as much as $3,000, depending on the vehicle and the year of the model and how many of that year/model have been sold. Purchasing the newest qualifying model typically gains the full amount of the tax credit, however it depends on the number sold of that particular model. The IRS monitors the number of cars sold, and as the number approaches 60,000 units the tax credit amount is decreased. The IRS also establishes the full tax credit amount for each qualifying vehicle. A comprehensive listing of qualifying Advanced Lean Burn Vehicles and an overview of how the IRS determines what cars make the list can be found at the IRS website along with related articles.

The credit is deducted from the total amount of tax owed, rather than a deduction which lowers a person's taxable income, in turn determining how much tax is owed. Another important detail to note is that the credit can only be claimed once by the original owner/taxpayer when the car is first put into service.

Additional information on diesel car tax credits can be found at the IRS website and fueleconomy.gov.

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