Hybrid Car Tax Credit

You may be eligible for a hybrid vehicle tax credit if you bought a hybrid vehicle in 2008. For the most fuel-efficient models, the credit can be worth up to $3,000. The exact amount of the credit is dependent upon the make and model of the vehicle and in what state the vehicle was purchased.

The Alternative Motor Vehicle Credit (the name given to the tax credit for hybrid vehicles), is applicable to vehicles bought or put on the road after January 1, 2006.

To qualify as a hybrid, the vehicle must have drive trains powered by both an internal combustion engine and a rechargeable battery. Most hybrid make and models do qualify for this credit- over 40 models. However, to confirm that your vehicle qualifies, check Form 8910.

Taxpayers may claim the credit on their 2008 tax returns only if they placed a qualified hybrid vehicle on the road in 2008. The credit is only available to original purchaser of the vehicle and are not available to an individual who purchased or leased the vehicle used during the course of 2008.

The credit has been phased out for some hybrid models but is available for new hybrid vehicles that became available this past year. After 60,000 hybrid vehicles are sold by a particular manufacturer, the tax credit is reduced and slowly eliminated. To claim the full credit, the vehicle owner must file by the end of the third month after the quarter when the manufacturer has reached this limit on sales.

Note: The credit for qualified Toyota and Lexus vehicles was eliminated for purchases on or after Oct. 1, 2007. The full credit for qualified Honda vehicles was available for all purchases in 2007, but has been reduced for purchases on or after Jan. 1, 2008.