Tax Credits And Benefits For Hybrid Car Owners

You might be wondering what tax incentives you are entitled to as a hybrid car owner. Do these incentives really make the hybrid vehicle worth its price tag? In the long run, do hybrid cars become cheaper to own? What about using hybrid vehicles on HOV lanes?

Tax Benefits vs. Additional Cost of Hybrid Vehicles

Beginning January 2006, an according to the Energy Policy Act, the government began awarding major tax credits to consumers who buy hybrid cars.

Tax credits are usually much more valuable than a tax deduction. Tax credits reduce tax amount dollar-for-dollar. On the other hand, a tax deduction will only remove a percentage of the taxes you may owe. Hybrid owners can itemize purchases on federal income tax forms, which in turn lower the total tax amount owed to the federal government.

Fact: hybrid vehicles carry a higher price tag than that of conventional gas engine vehicles. The reason lies with their costly batteries and because the hybrid vehicle has not one, but two separate engine beneath the vehicles. Despite this, tax credits do much to offset the cost of owning a hybrid car.

Car buyers who purchase new gas-electric cars were eligible for over $3,000 in federal tax credits. However, these tax credits applied to the first 60,000 hybrid vehicles cars that could be sold by a single automobile manufacturer. You had to act early to benefit from these tax advantages. Business and private hybrid owners or lessees are eligible for income tax credits for gas electric hybrid vehicles that are placed in service starting January 1, 2006 and bought on or before December 31, 2010.

The amounts of tax credits for hybrid vehicles are based on fuel economy improvements when compares to conventional vehicles in the same class of car or truck. Therefore, hybrid car owners with the highest fuel efficiency receive the largest tax credits for their vehicles.

Plug-In Electric Car tax credit will be starting on January 1, 2010. The tax credit for passenger vehicles and for light trucks will range from $2,500 to approximately $7,500. Of course, this will depend on the quality and capacity of the vehicle's battery. The first 200,000 plug in cars sold by automakers will be eligible for full tax credit. This tax credit will phase out after a year.

Hybrid car owners who buy a qualified plug-in conversion kit for their vehicle become eligible for a 10% credit. This credit is capped at $4,000 through December 2011.

Hybrid Cars Can Use HOV Lanes

The Energy Policy Act also offered the Federal Hybrid HOV Waiver. This waive allowed states to open high-occupancy vehicle lanes to hybrid vehicles scoring 50% or better in fuel efficiency in the city and 25% or better city and highway driving when compared to conventional vehicles. The number of passengers was not a consideration in these percentages.

More Incentives

Beyond any federal tax incentives, many states offer some rebates to encourage the purchase of hybrids. Businesses and insurance companies are providing similar incentives. You can consult the Internal Revenue Service for current incentives based on hybrid vehicle make and model.

In 2009, the American Recovery and Reinvestment Act extended tax incentives for consumers. These are the same tax incentives that were originally introduced in 2005 with the Energy Policy Act or EPACT. In 2008, it was amended in the Emergency Economic Stabilization Act.

Hybrid Cars Gaining Popularity

With the advent of recent technological improvements, hybrids are fast gaining popularity in the mainstream auto buying industry. These models have come along away to the point of developing different types of hybrids. Some of these vehicles are making use of renewable sources of energy such as solar power.

There are also advancements being made for an all-electric hybrid that uses the gas combustion engine merely as back up. The plug in hybrid works this way. "Going green" is a global movement to which new car technology is contributing. Can automakers keep up with the demand for hybrid cars? We'll just have to wait and see.

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