TAX CREDIT FOR HYBRID VEHICLES

If you bought a hybrid vehicle in 2006, you may be entitled to a tax credit on your 2006 return. The credit is worth as much as $3,150 for the most fuel-efficient models. The precise amount depends on the make and model of the vehicle and when the vehicle was purchased.

The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit known as the Alternative Motor Vehicle Credit. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006. Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the credit. Taxpayers may claim the credit on their 2006 tax returns only if they placed a qualified hybrid vehicle in service in 2006. Currently, forty four different models of hybrids are eligible for the credit.

The credit is available only to the original purchaser of a new qualifying vehicle. If the qualifying vehicle is leased the credit is available only to the leasing company.

If more than 60,000 vehicles of a particular model are sold, the tax credit is reduced. The full credit can be claimed up to the end of the third month after the quarter in which the manufacturer sells its 60,000th hybrid vehicle. The only producer for whom the credit has been limited is Toyota Motor Sales, USA, which includes certain Toyota and Lexus models.

To find out whether your car qualifies for the hybrid tax credit and the maximum amount of that credit, you can go to the IRS.gov website and search for

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