IRS Announces Hybrid Cars that Qualify for a Tax Credit

IRS Announces Hybrid Cars that Qualify for a Tax Credit


Last year's Energy Policy Act replaced the $2,000 clean-fuel burning deduction with a tax credit that is potentially worth much more. The tax credit for hybrid vehicles applies to 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 amount of the credit varies based on the fuel efficiency of the vehicle.

These models have been certified by the IRS for the credit in the following amounts:

2007 Ford Escape Front WD Hybrid — $2,600
2007 Ford Escape 4 WD Hybrid — $1,950
2007 Mercury Mariner 4 WD Hybrid — $1,950
2007 Toyota Camry Hybrid — $2,600
2005 Toyota Prius — $3,150
2006 Toyota Prius — $3,150
2006 Toyota Highlander 4WD Hybrid — $2,600
2006 Toyota Highlander 2WD Hybrid — $2,600
2007 Lexus GS 450h — $1,550
2006 Lexus RX400h 2WD — $2,200
2006 Lexus RX400h 4WD — $2,200
2006 Ford Escape Hybrid Front WD — $2,600
2006 Ford Escape Hybrid 4 WD — $1,950
2006 Mercury Mariner Hybrid 4 WD — $1,950
2005 Honda Insight CVT — $1,450
2006 Honda Insight CVT — $1,450
2005 Honda Civic Hybrid MT and CVT — $1,700
2006 Honda Civic Hybrid CVT — $2,100
2005 Honda Accord Hybrid AT and Navi AT — $650
2006 Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration — $1,300
Another hurdle: If you're interested in the tax break, you may want to buy soon because the full credit is only available for a limited time. Taxpayers can claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. The IRS and manufacturers are tracking these amounts. For example, for the quarter ending March 31, 2006, the IRS announced that Toyota (which owns Lexus) sold 41,779 qualifying vehicles to retail dealers and Ford (which owns Mercury) sold 6,192 qualifying vehicles.

For the second and third calendar quarters after the manufacturer records its sale of the 60,000th vehicle, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit.

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