When you purchase a new car, if you purchase a hybrid and if a few other rules apply, you may be eligible for a hybrid car tax credit. If you purchased your vehicle after December 31, 2005 or will be purchasing it prior to December 31, 2010 you might be eligible for a hybrid tax write off. If you live in the United States, the federal government is allowing these hybrid incentives to encourage everyone that purchases a new vehicle to choose a hybrid.
Who Is Eligible for the Tax Credit
Any United States citizen that purchases a hybrid car between 12/31/05 and 12/31/10 will be eligible to claim this one-time credit. The credit only applies to the original buyer of the vehicle. If you buy your car used, you don't qualify for the hybrid incentives. The new vehicle must have been purchased to be used by the taxpayer that is claiming the credit, and must be driven primarily in the United States.
How Long the Credit Lasts
The hybrid car tax credit will slowly be phased out when the manufacturer has sold more than 60,000 of the eligible vehicles. The way it will work is that once the manufacturer has hit that number, the current and the next quarter, taxpayers will be able to claim the full credit. For the next two quarters, taxpayers will be eligible for 50 percent of the full credit, and for the last two quarters they will be able to claim 25 percent. After that, the credit will be phased out.
The sooner you buy your new hybrid vehicle, the larger tax credit you will be eligible for. As of February, 2010, Toyota and Honda no longer qualify. Ford hybrid cars were phased out completely as of the first of April, 2010. Mazda, GM, Nissan and Mercedes still have tax credits available. You may be seeing more diesel run vehicles on the road. That's because the hybrid incentive also carries over to vehicles that use diesel fuel. These tax credits will all be phased out by January 1, 2011.
Special Rules for Plug-in or Electric Hybrids
If you purchased a plug-in hybrid during 2009, you might have found yourself eligible for a federal income tax credit of as much as $7,500, depending on the capacity of the battery that powers the vehicle. If you purchased a plug-in hybrid after 2009, you might still be eligible for a tax credit of up to $7500, but again, the amount of the credit is dependent on the battery that powers the vehicle.
How do I Claim the Credit?
If you purchased a vehicle that is eligible for one of the hybrid incentives, you will need to fill out the appropriate form with your federal income taxes. You will then need to report the credit on your Form 1040 when you file it. To claim an electric hybrid or a plug-in hybrid, file form 8834. For other hybrids, including diesel, use form 8910. You will need to make sure you carry the credit over to your 1040, but after that, you're done.
Related Questions and AnswersIs the Hybrid Car Tax Deduction Different with Diesel Hybrid Cars?
There is little difference between hybrid car tax deduction and the diesel hybrid car tax deductions in terms of principle. However, the trending pattern does appear to be that the tax credited to a diesel hybrid is less than that credited to a hybrid. The biggest deduction in tax with a hybrid is the Ford Fusion Hybrid, coming in at $3,150. Meanwhile, the most significant tax deduction on a diesel hybrid is $1,800. You would benefit from this if you purchased either a BMW X5 xDrive35d, or the Mercedes GL 320 Blutec. If you were to buy either of these models, the BMW would cost at least $44,220 and the Mercedes a staggering $58,200 before the tax deduction.What Car has the Best Hybrid Car Tax Incentive?
On entering 2011, the best hybrid car tax incentive is on the Ford Fusion Hybrid. With a tax credit of $3,400, it surpasses the much talked about Toyota Prius, which has a modest $3,150 tax credit. The reason that tax incentives are being given on hybrid cars are to entice new car buyers to trade in their dirty petrol and diesel models. These are damaging the environment and contributing to global warming. They're coming out with a cleaner, more fuel-efficient hybrid model. If you are interesting in buying a Ford Fusion Hybrid, then it would set you back $19,280 brand new, making it $16,130 once the tax has been credited.