It comes as no surprise to me that the word “tax” is in the adjective “taxing” which means physically or mentally demanding. Even if you’re expecting a return, doing your taxes probably ranks pretty low on your fun meter.
When it comes to taxes, incentives are always good, and there are ways you can save money through federal tax incentives on the purchase of a new hybrid, plug-in hybrid, alternative fuel or electric vehicle. But this may be your last chance to benefit from the Alternative Motor Vehicle Credit since it expired last year. There is currently no expected tax incentive for 2011. And taking full advantage of this credit may take a little leg work on your part. There are very specific parameters for qualified hybrid vehicles.
But here’s a little information that will help you get started, if not motivated to ask an IRS tax representative or tax professional for more information regarding your specific vehicle.
Hybrids purchased or placed into service after December 31, 2005 may be eligible for a federal income tax credit of up to $3,400.
Credit amounts begin to phase out for a given manufacturer once it has sold over 60,000 eligible vehicles. So many popular models, such as Honda, Toyota, Volkswagen, Audi, Lexus, Ford, Mercury and Lincoln, no longer offer tax credits because of the phase-out plan in the law.
Vehicles purchased after December 31, 2010 are not eligible for this credit.
Plug-in Hybrid Electric Vehicles (PHEVs) are hybrids that use larger batteries that can be recharged by plugging then into a common household electrical outlet. Plug-in Hybrids purchased after December 31, 2009 may be eligible for a federal income tax credit of up to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.
According to the U.S. Department of Energy, some diesel or lean-burn vehicles purchased or placed into service after December 31, 2005 may be eligible for a federal income tax credit of up to $3,400.
Alternate Fuel Vehicles:
An alternative fuel vehicle is a vehicle that runs on fuel other than “traditional” petroleum fuels like ethanol, compressed natural gas or liquid natural gas. Qualifying alternative fuel vehicles (AFVs) purchased or placed into service between January 1, 2005 and December 31, 2010 may be eligible for a federal income tax credit. The amount varies greatly depending on the make, model and year it was purchased.
Electric vehicles (EVs) are vehicles that use one or more electric motors for propulsion, which means they’re driven entirely by an electric motor powered by a rechargeable battery.
Electric vehicles purchased in or after 2010 may be eligible for a federal income tax credit of up to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.
Some state and local governments also offer incentives for hybrids. Check the U.S. Department of Energy’s list of State and Federal Incentives and laws to see what tax credits you might be eligible for.
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