Hybrid Car Tax Credit Confusion

credit: Beige AlertTo encourage people to buy environmentally friendlier hybrid cars, the United States government has been running some tax incentive schemes. If you are one of the people who bought a hybrid car expecting a tax credit of up to $3,000, it might be a shock to find out that you may not get all of this credit after all.

The reasons are complicated. For one, the popularity of the Toyota and Lexus brands of hybrid means that they had sold all of their tax credit eligible vehicles before October 1, 2007. If you bought one of these after that date, unfortunately that’s too bad – you’ve got no chance of a tax credit. A similar situation is about to occur with the Honda Civic hybrid, with the tax credits reducing to $1,050 at the moment and down to $525 in the summer.

The other problem with getting your hybrid vehicle tax credit hinges on whether or not you have to pay the Alternative Minimum Tax (AMT). Generally, high income earners with a lot of tax deductions may be subject to the AMT, and the hybrid vehicle tax credit is one of those deductions that isn’t allowed under the AMT. If you fall into this category, you may get a partial deduction or none at all, depending on how the figures work out.

Tags: Economy & Business News | energy | Taxes