Tax exemptions and credits with Audi TDI and VW TDI
Tax exemptions and tax credits with the Audi TDI and VW TDI
This article discusses known tax exemptions and credits for the VW and Audi TDI. This includes the American Recovery and Reinvestment Act of 2009, state exemptions such as the new/used CT sales tax exemption, and the federal income tax credit for VW TDI and Audi TDI.
Some information on this page also applies to the following non-VW Audi diesel cars: 2009 BMW 335d sedan and X5 xDrive35d, 2009 Mercedes Benz GL 320, ML 320, and R 320 Bluetec. These tax credits have since expired but this page will stay up for reference. Final update Feb 11, 2011 for model year 2011 models below.
This page features direct links to the official references so you can verify all information yourself. This website is not responsible for your tax situation or planning as each situation is different. Consult your tax attorney or accountant for details. Do not trust the dealer or salespeople when it comes to tax advice - they'll tell you anything to sell you a car but you're the one who pays the tax.
I am aware of tax exemptions in CT only, if you know of a local or state tax situation, please post your comment in the myturbodiesel.com forum with an official reference so that others can benefit.
Please read the section that applies to you carefully because some apply to new cars only and some apply to both new and used cars. Some states have sales tax exemptions for high mileage cars, for new and/or used. The 2009 Jetta TDI qualifies for a $1300 federal income tax credit (new car only). The 2010 Jetta TDI, 2010 Golf TDI with manual transmission, and 2010 Audi A3 TDI qualifies for a $1300 credit. *NOTE - the 2010 Golf TDI w/DSG transmission qualifies for a $1700 credit, see below for more details why. The Touareg and Audi Q7 3.0L engine TDI have a $1150 federal tax credit (new car only). *NOTE - if your purchase was after July 1st, the credit amount is half these amounts. The info above will stay up for reference.
The American Recovery and Reinvestment Act of 2009 also gives a deduction on state/local sales and excise tax on new cars, light trucks, motor homes and motorcycles through 2009, see below for more details and explanations. It also changes the AMT limitations for 2009.
For 2009 tax year: If you are subject to AMT, you can claim the Alternative Motor Vehicle Credit ($1300 income tax credit) for 2009. This was not the case for the 2008 tax year. References are below.
If you use turbotax or have a competent tax preparer, it will ask if you bought a car or one that qualifies for the alternative motor vehicle credit.
Basic definitions: Federal taxes are separate from state or local taxes. A tax exemption means you don't have to pay taxes on the car purchase when you pick up the car. If your state has this exemption it will apply only to state taxes. If your local town has an exemption it will apply only to town property taxes. The Federal income tax credit means you credit $1700, $1300, or $1150 (Touareg/Q7 SUVs) towards the total amount of federal income tax that you pay. The federal income tax credit has nothing to do with state income taxes.
EPA fuel economy ratings
Audi Q7 TDI: 19 city/25 hwy
2009-10 Touareg TDI: 17 city/25 hwy
2011 Touareg TDI:??
2009 Jetta TDI: 29 city/40 hwy
2010 VW Jetta/Golf TDI with manual transmission: 30 city/41 hwy
2010 VW Jetta/Golf TDI with DSG: 30 city/42 hwy
2010 Audi A3 TDI fuel economy: 30 city/42 hwy
Known STATE tax exemptions (read carefully because some are new cars only, some are new and used):
CT - This exemption has expired but will stay up for reference until next tax year.
this applies to any new or used car that gets over 40 mpg estimated city or highway. The official mpg is determined from the current United States Environmental Protection Agency (USEPA) rating. This means that cars before 2008 when the EPA mileage rating criteria was changed have to be reviewed under the newer rating criteria. Because of this, automatic transmission TDI except for the 1999 Jetta TDI do not qualify. I have no idea why the 1999 auto Jetta qualifies since there was no change in the engine or milage until 2004, that's just what the official publication says. You could save quite a bit of money so it might be worth it to call the department of revenue services and tell them why your car should be included. The CT exemption also includes the mk3 Golf TDI which was never sold in the US, so who knows how they figure these things out.
The CT exemption starts Jan 1, 2008 and ended June 30, 2010. Both purchases and leases of new and used cars qualify. This doesn't mean you can buy the car in CT and then go back to your state, you must be a CT resident. If you are a CT resident you can buy the car anywhere and claim the sales tax exemption. If your car is a business deduction, this can change the tax situation, consult your tax advisor for more details. Because this has
Click the image below for a saved reference or click the link to view the reference at the CT DRS site: http://www.ct.gov/drs/cwp/view.asp?A=1510&Q=421140
All states -* EXPIRED AS OF 01/01/10 but this section will stay up for reference so you can do your taxes for 2009. The American Recovery and Reinvestment Act of 2009 (under Sales, Other Tax and Fees Deduction for Vehicle Purchases) provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles through 2009. It also provides for the deduction of other taxes or fees paid in states with no sales tax. The deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A. The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified AGI between $125,000 and $135,000. A deduction is not an exemption.
To qualify, the new car purchase must be made after Feb. 16, 2009 and before Jan 1, 2010 to be eligible for this special deduction. THIS IS NOW EXPIRED but will stay up for reference.
If you live in Alaska, Delaware, Hawaii, Montana, New Hampshire, or Oregon, you have no state sales tax so you can deduct other state or local taxes or fees. See here for the reference: http://www.irs.gov/newsroom/article/0,,id=209624,00.html
Taxpayers who make qualifying new vehicle purchase this year can estimate their deduction with the help of IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k on Worksheet 10 take into account purchases above the $49,500 limit, as well as the income phase-outs.
FEDERAL income tax credit (have since expired)
Tax credit amounts
The Jetta auto/manual and Golf manual tax credit is $800+500 = $1,300.
The Golf auto tax credit is $1,200+500 = $1,700.
The 2010 Touareg and Audi Q7 3.0L engine TDI have a $400+$750= $1150 credit.
The 2011 Touareg credit is $400+$500 credit=$900 (it lost a few hundred lbs which put it in a more competitive weight class)
If you took delivery after June 30 2010, these credit amounts are reduced by 50%. For sales after Dec 31, 2010, there is no credit. This has been confirmed at VW because they have passed over 60,000 sales and can be verified at the IRS site.
The full credit only applies to cars sold after the calendar quarter which the manufacturer sells 60,000 cars under the lean burn technology class. VW/Audi passed this mark during early 2010. All cars sold during the first 2 quarters of 2010 will still get the full credit. This way, you don't buy the 60,001 car and get screwed. Then it's phased down to 50% of the credit for 2 calendar quarters. Beginning with the 6th calendar quarter after passing 60,000 or Dec 31, 2010, whichever is first, the credit ends.
Do 2011 model year TDI qualify for the tax credit?
2011 models sold during calendar year 2010 (credit expires at end of year) qualify for this. Here is the IRS's official listing where they state that 2011 models sold during 2010 qualify http://www.irs.gov/businesses/article/0,,id=225054,00.html Since all 2011 models were delivered after June 30, the credit is half the original amount. These amounts are shown below.
2011 VW Jetta sedan/sportwagen and manual transmission Golf: $650
2011 DSG transmission Golf TDI: $850
2010 Touareg: $575
2011 Touareg: $450
2011 Audi Q7 TDI: $900
How the credit is calculated
The TDI fall under IRS Title 26, subtitle A, chapter 1, subchapter a, part iv, subpart b, § 30B(c). This states that "There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of...the new advanced lean burn technology motor vehicle credit determined under subsection (c)." It's summarized here with the parts relevant to the TDI discussed. The credit is a determined from 2 values. The first value is calculated from how fuel economy vs. the generic 2002 city average fuel economy based on weight class. *It is NOT based off the actual 2002 model fuel economy, it's based off an IRS table based on gross weight class.
Working backwards from the numbers I determined the IRS assumes the 2002 Jetta is in the 4,500 lb. gross weight class. The 2002 Golf manual is in the same 4,500 lb. weight class but the 2002 Golf auto is in the 5,000 weight class. Working backwards from the numbers this places the Jetta in the 150-175% category and the Golf with automatic transmission in the 175-200% category. (A 2009-2010 city rating of 30 mpg gives a 70% increase over the gross weight table class for all Jetta and Golf manual, putting it in the 150-175% category . The Golf gets an increase of 88% which bumps it to the 175-200% increase.) Neither of these numbers seem correct because the 2002 Golf/Jetta TDI had gross weights of about 3900. This should put them in the 4,000 lb weight class but they are obviously not according to the numbers. The manual Jetta weighed about 100 lbs. less which must be the reason why the Golf with automatic transmission got bumped up to the next weight class. In addition, the Audi A3 is bigger and heavier than a Golf so this adds to the confusion. However, working backwards from the numbers you can see that these assumptions of gross weight class are correct.
The Touareg and Q7 numbers are also given below.
In the case of a vehicle which achieves a fuel economy (expressed as a percentage of the 2002 model year city fuel economy) of:
At least 125 percent but less than 150 percent - $400 (first value for all VW Touareg TDI and Audi Q7 TDI)
At least 150 percent but less than 175 percent - $800 (first value for Golf TDI with manual transmission and all Audi A3 TDI, Jetta TDI) At least 175 percent but less than 200 percent - $1,200 (first value for only Golf TDI with DSG transmission)
At least 200 percent but less than 225 percent - $1,600
At least 225 percent but less than 250 percent - $2,000
At least 250 percent - $2,400
The second value is based on lifetime fuel savings. Lifetime fuel savings is defined as, in the case of any new advanced lean burn technology motor vehicle, an amount equal to the excess (if any) of:
(A) 120,000 divided by the 2002 model year city fuel economy for
the vehicle inertia weight class, over
(B) 120,000 divided by the city fuel economy for such vehicle.:
In the case of a vehicle which achieves a lifetime fuel savings (expressed in gallons of gasoline):
At least 1,200 but less than 1,800 - $250
At least 1,800 but less than 2,400 - $500 (second value for Audi A3, Jetta, and Golf TDI, and 2011 VW Touareg TDI)
At least 2,400 but less than 3,000 - $750 (second value for Audi Q7 and 2010 VW Touareg TDI)
At least 3,000 - $1,000.
More details and examples
This credit only applies to brand new car purchases and leases before Dec 31, 2010. Caution: in a lease, only the lessor can take the credit - the lessee (you) cannot take the credit. This is shown in the instructions for form 8910. It's a nonrefundable credit, not a refund. As a simplified definition, this means you deduct it from federal income tax but not below $0. Software programs like turbotax will automatically figure it out. Here are some highly simplified examples: if you paid $2000 in federal income tax, you would only owe $700 after the $1300 credit. If your taxes are $1000 and have the $1300 credit, you owe $0 but you don't get a refund of $300. If your taxes are $1300 and you otherwise get a $100 refund before applying the $1300 credit, you can still use the credit to offset your tax liability to $0 and get the $100 refund plus any additional refund after recalculating your taxes.
AMT restrictions applied for 2008 but for the 2009 tax year, if you are subject to AMT you can claim the Alternative Motor Vehicle Credit ($1300 income tax credit on Jetta TDI) for 2009. The change is under the Energy Provisions of the American Recovery and Reinvestment Act of 2009 (stimulus bill) Refer to Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT (Section 1144) for the exact reference.
The tax credit must be submitted under notice 2006-9 and Internal Revenue Code, Section 30B relative to the Volkswagen Jetta 2.0L TDI sedan and Sportwagen. Fill out Form 8910, Alternative Motor Vehicle credit and then 1040 (assuming personal use car). Click the thumbnails below for more details. See here for the reference on the Jetta, Touareg, and Q7.
Here is form 8910. Here are the instructions for form 8910.
Tax credit amounts for TDI
2009-2010 Jetta sedan and wagon = $1300 income tax credit for both manual and DSG under Advanced Lean-Burn Technology Vehicles which is under the Alternative Motor Vehicle Credit.
2010 VW Golf TDI with manual transmission - $1300 tax credit
2010 VW Golf TDI with DSG (auto) = $1700 tax credit. This is w/DSG only. It can be confirmed here. DSG is the automatic transmission, see 1000q: DSG FAQ for more details.
2010 Audi A3 TDI get a $1300 credit even though the official EPA rating is the same as the Golf w/DSG because of how the credit is calculated. The reference for the 2010 VW and Audi TDI under the advanced lean burn vehicle credit can be found here. See above for the explanation on why.
VW Touareg and Audi Q7 3.0L = $1150 federal tax credit.
Old sales number estimates below:
My old estimate as of 2009 was that about 56,000 TDI have been sold. VW didn't release any official numbers until early 2010 so I worked backwards to estimate how many TDI they had sold. As of 1/5/2010, VW sold 53,496. This number does not include Audi. Here is a monthly breakdown of US sales. These sales figures are estimates and may not perfectly total up. The most recent official number (about 12,000) is from the end of 1st quarter 2009.
Monthly VW and Audi TDI sales figures
2008 (confirmed number) 12,218 ?
2009 - Jan (estimated) 2600 ?
Feb (estimated) 2500
March (estimated) 3300
April (estimated, touareg 2 TDI) 2700
May (confirmed number) 3862
June (estimated) 5072 = 1605 (wagon) + 3372 (sedan)+ 95 (touareg)
July (confirmed number) 6320 = 2415 (wagon) + 3685 (sedan) + 220 (touareg)
August (estimated) 4500
September (estimated) 4200
October (confirmed number) 4008 = 1819 (wagon) + 1839 (sedan) + 234 (touareg)
November (confirmed number) 3667
2009 total (estimated) 42,927 (estimated)
Here is another source for details on the new energy tax credit for diesels: http://www.fueleconomy.gov/feg/taxLeanBurn.shtml
FEDERAL Consumer Assistance to Recycle and Save Act aka "Cash for clunkers voucher credit" for TDI
Audi Q7 and VW Touareg included
Final update: this stimulus "CARS" aka "Cash for clunkers" expired as of Monday August 24, 2009 but this section will stay up for reference.
This was a US stimulus program that gave a $4500 credit towards the purchase or lease of a new vehicle when you trade in your car/SUV/light truck. Federal funding was limited to 1 billion dollars. This was estimated to be about 250,000 vehicles. Due to the success of the program, funding was increased from $1 billion to a total of $3 billion. VW has a page discussing it at: VW CARS - cash for clunkers program.
Audi Q7 TDI mileage: 19 city/25 hwy
Touareg2 TDI mileage: 17 city/25 hwy
2009 Jetta TDI fuel economy: 29 city/40 hwy
2010 Jetta TDI fuel economy: 30 city/41 hwy
2010 Golf TDI with DSG fuel economy: 30 city/42 hwy
2010 Audi A3 TDI fuel economy : 30 city/42 hwy
Other details that don't apply to TDI: SUVs, trucks, and pickups must be traded in for something that gets at least 2 mpg better only get $3500. If the new one gets at least 4 mpg better you get the full $4500. Cars must be traded in for something that gets at least 4 mpg better only get $3500. If the new car gets at least 10 mpg better you get the full $4500.
Reference: http://www.cars.gov, cash for clunkers government info website