The Cars

No longer do young people want to become rich enough to own a Caddy — they now want to own a hybrid car and “go green” the trendy way. It’s a boon to the planet, a boon to your bank account, a boon to your status as being hip and trendy with the latest wheels. There are many tax benefits of hybrid vehicles, as you will find out in this article.

The US government has realized that it would be the perfect gambit — offering tax incentives to drivers to encourage them to somehow do something to protect the environment.

But hey, wait a minute Mr. Postman — don’t get all too giddy before you fully understand the inner machinations. Not every “hybrid” qualifies for hybrid tax relief programs, and the rules herein can be quite convoluted and difficult to understand for the common man.

If a car has both a gas engine and electric engine, then it is termed as a full on hybrid vehicle. For example, the Toyota Prius is considered to be a full on hybrid. But there are other vehicles that are purportedly hybrids, but are not classified as such by the government. This is because these vehicles do nothing more than shut off their engines when at idle; due to this lack of hybrid functionality, they don’t quite ‘cut the mustard’ as hybrid vehicles.

The full tax credit is applicable to only the first 60,000 cars sold by the car maker. After that, you will not qualify for that high a credit anymore. You want to buy the vehicle early in order to qualify for the tax credit in full. Those who lease, unfortunately, do not qualify for tax credit at all.

Compared to the older tax incentive programs, the newer programs since introduced have more value to consumers. You will, however, need to contact the IRS for more specific information (such as the amount and some stipulations), but our friends at the ACEEE have released some estimates which could give you a fairly good ballpark of tax estimates.

The Toyota Prius, according to these estimates, is distinct as being the only hybrid that qualifies for the full $3,400 tax credit. The Ford Escape 2WD, Honda Insight and Toyota Highlander 2WD, on the other hand, qualify for a credit of $2,600. A $2200 credit is available for the Lexus RX400H, Honda Civic Auto Transmission, and Toyota Highlander 4WD. The Ford Escape 4WD and Honda Civic Manual Transmission would both garner you a credit of $1,950. Three more vehicles, the Lexus GS450H, Nissan Altima and Toyota Camry qualify for a credit of $1,300. Lastly, the Honda Accord, GMC Sierra and Chevrolet Silverado qualify for a credit less than $1,000.

Disclaimer – the above numbers are ESTIMATES. The actual numbers will have to be obtained from the IRS or you’ll need to wait until they release them.

The basics for being able to take the credit are as follows: you must purchase the vehicle new and it cannot be for re-sale. Sounds easy enough, but as would always be case, there will always be some caveats, so make sure you read the fine print because you wouldn’t want THAT to put a damper on your plans to get a tax break.

It is indeed a good time to take advantage of the tax benefits of hybrid vehicles. But if you want to get those tax breaks and make the most out of them, it is imperative you have a little chit-chat with your bookkeeper and, before we forget…do your research!

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