Time for Hybrid Buyers to Cash in on Federal Income Tax Credit

This is the first year hybrid buyers can claim the new hybrid vehicle credit on their Federal income tax return. The new tax credits, as high as $3,150 for some vehicles, are a significant increase over the tax deductions previously available for hybrids. Unfortunately, the regulations granting these incentives are more complex than in previous years and may be confusing to some consumers.

The credit amount depends upon the vehicle's make, model, and model year, but it is also reduced every few quarters once a manufacturer sells a specified number of qualifying vehicles. Therefore, the date the vehicle is placed in service also affects the credit amount. In addition, consumers will have to fill out an additional tax form (Form 8910) rather than just entering the incentive amount on their 1040 form, as in previous years.

While these new credits can be confusing, www.fueleconomy.gov <http://www.fueleconomy.gov/> provides information to make claiming these tax credits a little easier. The site, maintained by the U.S. DOE and EPA, provides

*      Credit amounts and phase-out dates for qualifying vehicles

*      Instructions for filling out income tax forms

*      Links to IRS tax forms, press release, and guidance documents

*      Information on additional requirements that must be met to claim
the credit

 

The site also provides information to help consumer claim the tax credits for qualifying electric and alternative fuel vehicles, as well as deductions for hybrids and other vehicles placed in service before 2006.

While www.fueleconomy.gov <http://www.fueleconomy.gov/> provides this information to help consumers claim these income tax credits, the tax information on the site should not be viewed as official or legally binding. For more-detailed information, consumers should consult an IRS tax representative and/or official IRS publications (www.irs.gov <http://www.irs.gov/> ).