Tax credits and tax deductions ~ Hybrid Car Review
Hybrid Car Review: Tax credits and tax deductions

Thursday, November 24, 2005

Tax credits and tax deductions

"Buying a hybrid vehicle will not save you money in the long run." And that's because hybrids tend to cost (on average) $3000 more than their counterparts. And the truth is you probably won't save that much on fuel costs over the lifetime of your car. But it's not the long run that could matter most. You could be saving money almost immediately through tax deductions (2005) or tax credits (2006).

You may be eligible for a "clean fuel" deduction of $2,000 if your hybrid vehicle is placed in service by the end of 2005. The following vehicles are eligible (from

Vehicle Make & Model
Model Years
Ford Escape Hybrid
Honda Accord Hybrid
Honda Civic Hybrid
Honda Insight
Lexus RX 400h
Mercury Mariner Hybrid
Toyota Highlander Hybrid
Toyota Prius
* Vehicles approved by IRS as of Nov. 14, 2005. Other hybrids may be approved at a later date.

After January 1st, 2006, you may be eligible for a tax credit instead. Estimated credits (American Council for an Energy-Efficient Economy; for hybrid vehicles range from $250 to $3150 (the maximum possible under the provision is $3400), with the Toyota Prius projected to receive the highest credit.

So if you put together the savings in what you pay on your taxes and what you pay for filling up, you could be talking about significant savings over the lifetime of your car.

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