Auto Tax Credits For Eco-Friendly Hybrid Cars

By dancurranjr On May 25th, 2009

irsAuto tax incentives for Hybrid cars and electric vehicles are being phased out later in 2009. However, there could be new tax credits for these eco-friendly cars. The whole purpose of these tax deductions is to reduce the amount of carbon emissions, which provide cleaner air quality.

The tax incentives started with the Energy Policy Act of 2005, which replaces the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation. The tax credit for hybrid vehicles applies to electric vehicles purchased or placed in service on or after January 1, 2006.

The credit is only available to the original purchaser of a new qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit. The Hybrid vehicle must also have a drive train powered by both an internal combustion engine and a rechargeable battery.

This is a list of some of the models, which qualify, including the amount for the tax credit:

  • Chrysler Aspen Hybrid – $2,200
  • Dodge Durango Hybrid – $2,200
  • Ford Escape Hybrid 2WD – $3,000
  • Ford Escape Hybrid 4WD – $1,950
  • Mazda Tribute Hybrid 2WD – $3,000
  • Mazda Tribute Hybrid 4WD – $1,950
  • Mercury Mariner Hybrid 2WD – $3,000
  • Mercury Mariner Hybrid 4WD – $1,950
  • Nissan Altima Hybrid – $2,350

This is not a complete list and there might be another wave of tax credits for all-electric vehicles. Most automakers, including Ford, General Motors, Honda, and Toyota are already building new prototypes. These prototypes will enter the market in late 2010, 2011, and 2012.

Critics of the Energy Policy Act and the recent tax credits say the government should do more to help convert gasoline powered automobiles to Hybrid and electric solutions. For example, the government is already phasing out the tax credits during the economic recession. The critics feel that the tax credits should be extended for at least another 24 months.

The tax credits started with a $7,500 deduction which actually helped the new Hybrids gain respect and awareness. However, consumers can still save fuel costs as most of the new Hybrids can travel up to 50 miles without using a single drop of gasoline. As gas prices rise, drivers can switch the vehicle from gas to electric power for shorter travel rides.

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