Hybrid Owners a Step Closer to Knowing Tax Credit

Washington DC January 16, 2006; The AIADA newsletter reported that automakers will soon be able to forecast how much a hybrid owner is eligible to deduct from his/her taxes under a new law issued by the IRS, said USA Today.

According to the IRS guidelines, automakers must now submit paperwork that ensures their vehicles follow certain rules and protocol in order to be certified as eligible for the credit.

The IRS will then have the power to grant or deny the credit based on the emissions level and fuel economy of the particular vehicle.

The most clean-burning, fuel efficient hybrids will be eligible for a tax credit of up to $3,400.

According to USA Today, the closest estimates right now are as follows: Ford Escape or Mercury Mariner hybrid SUV -- the tax credit could range from $2,600 for two-wheel drive models and $1,950 for four wheel drive; Toyota -- the tax credit could range from $2,200 to $3,150, depending on the type of hybrid purchased (i.e. the Prius sedan to the big Highlander SUV); Honda -- the tax break on the new 2006 Civic will likely be $2,100, the 2005 Accord hybrid (the ’06 isn’t out yet) will receive up to $650 in credits and the Insight will get no more than $1,450.

The new law, however, limits the number of hybrids that can receive the credit from a single automaker. Toyota, for example, is informing buyers that reductions could be seen on deliveries after June 30.

The new guidelines replace the old $2,000 tax deduction for all hybrid owners. "This is going to provide much-needed certainty to Americans who are purchasing these vehicles," Treasury Secretary John Snow announced in Detroit. "It means they will be able to rely on the manufacturer’s certification when they claim the credit on their tax return."