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Article Series: Taxes
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Tax
Breaks and Hybrid Cars
With gas prices going up and up and up, and
the new “cheap” price for gas hovering around the $2.00 per
gallon mark, hybrid cars have been getting a lot of attention.
Hybrid cars were previously only discussed in environmentally
active circle, but now that gas prices are hitting everyone
where it hurts - the wallet - demand for the cars has reached
a fear pitch. But aside from the environmental benefits of
driving a hybrid car, and the savings on your gas bill, you
now have a new reason to get excited about these efficient
little autos. Buying a hybrid car can save you big bucks on
your tax bill.
Tax breaks for purchasers of hybrid cars are nothing new.
The government has been giving tax breaks in one shape or another
to hybrid drivers since 2004. It is the tax incentives that
came into effect on January 1, 2006, that really made a huge
difference to drivers, though. The tax credits vary widely
depending on the model of hybrid car purchased, but you can
expect a credit ranging anywhere from $350 for the upcoming
2007 Chevrolet Silverado or Sierra hybrid to $3,150 for a Toyota
Prius. Tax incentives like these, which can make a significant
impact on your tax bill, have sent drivers flocking to hybrid
models.
There
are some restrictions that come along with these tax breaks. They can only be applied to cars purchased on or after
December 31, 2005; hybrid cars purchase in 2004 and up until
December 30, 2005, are still eligible for the old tax credits.
These incentives only apply to people who purchase new hybrid
cars; used cars do not qualify for a tax break. In some circumstances,
hybrid owners who sell their cars may have to reimburse the
IRS for the tax credit they received. The tax breaks only apply
to people who own their cars. The tax credits for leased cars
may be claimed by the dealership, in some circumstances. The
hybrid car must be used for driving within the United States.
These
tax breaks won’t last forever. They are only good for
the first 60,000 cars sold of any particular model. While it
may be awhile before this caveat affects Honda, Lexus, or Mercury
hybrids, Toyota hybrids have already passed that 60,000 mark.
As of October 2006, Toyota hybrid drivers are only eligible
for 50% of the original tax credit. Eventually, that number
will fall to 25%. Other hybrid models will be hit with a similar
sliding scale when they sell 60,000 units.
Additionally, the tax credit bill has a time limit as well.
These tax breaks will expire in December 2010, at which point
lawmakers will have to either scrap or renew the bill.
This information about tax credits for hybrid cars is general;
you should always consult a financial advisor to understand
the exact nature of the rules, as they apply to you. If you
are taxed under the Alternative Minimum Tax scheme, you will
be unable to claim any deductions for a hybrid car. If you
are someone who receives a lot of tax credits, for things such
as childcare or retirement savings, then the hybrid tax credit
comes last on the list. If you are left with an outstanding
tax bill after your other reductions, your hybrid tax credit
cannot be more than the amount that you owe; if you owe $200
after your other deductions, you will only receive $200 for
your hybrid credit, even if you technically could have received
more. For these reasons, always get professional advice before
wading into the world of tax credits.
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SolveYourProblem.com : 2007
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