Taxing Time: What's Available in Hybrid Vehicle Tax Credits
The high price of gasoline has many people thinking about buying more fuel-efficient vehicles. In addition to having improved gas mileage, these vehicles also may qualify for tax credits. Did you buy a hybrid car in 2007? Are you planning on buying one in 2008?
There are four types of alternative vehicles for which credits may be available. Qualified hybrid vehicles combine an internal combustion engine with a rechargeable battery. Advanced lean-burn-technology vehicles have internal combustion engines with direct injection, designed to use more air than is necessary for complete combustion of the fuel. Qualified alternative-fuel vehicles include cars and trucks that run solely on compressed or liquefied natural gas, liquefied petroleum gas, hydrogen, or any liquid that is at least 85 percent methanol. Qualified fuel-cell vehicles are propelled by power derived from one or more cells that convert chemical energy directly into electricity by combining oxygen with hydrogen fuel.
The credit for purchasing (not leasing) a new hybrid car or truck with a gross vehicle weight rating of 8,500 pounds or less can range between a minimum of $250 and a maximum of $3,400 based on fuel economy. Previously owned vehicles do not qualify. The hybrid car tax credit is actually a combination of two separate tax credits — the hybrid tax credit and the alternative fuel vehicle credit. The math is complicated, but not to fear — the car manufacturers and the IRS will certify the tax credit amount available to you.
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