Tax Breaks Not Offered for All Hybrids
March 5th, 2008
There are a variety of reasons to by a hybrid car. They are cleaner and better for the environment. They are quieter, adding less noise to an already ear splitting world. They use less gas, so drivers can see significant savings when they fill up at the pump. For many people, the promised tax breaks for hybrid owners is enough to tip the scales in the favor of the gas and electric vehicles.
One of the most popular of all of the hybrid cars is the Toyota Prius, but buyers of new Priuses may be in for a shock come tax time. The popular car is no longer eligible for a tax credit. Neither is the Honda hybrid cars.
It has always been hard to understand the way the hybrid tax credit has worked. The credit is applied to all qualified hybrid purchases between 2006 and 2010. Oddly enough, there is no credit for plug in hybrid vehicles, even if such vehicles make it to the market by 2010.
The tax credit, or the Alternative Motor Vehicle Credit– its official name, is based on the hybrid’s maker and the model. The amount of the tax credit is based on the weight of the car and the car’s gas mileage. It is also based on how many of the hybrids have been sold. Only the first 60,000 of any hybrid model is eligible for the full tax credit.
The tax credit cap was part of a deal that lawmakers made to get the support of American automakers who did not want Toyota and Honda to have an unlimited tax credit benefit. Since Toyota and Honda were the first auto makers to introduce hybrids, so it is no surprise that both Honda and Toyota have met the 60,000 car sales limit.
Ford, which was the first American car maker to debut a hybrid car, could possibly meet the 60,000 car threshold this year, but General Motors is still far from reaching the cut off and Chrysler has yet to manufacture a vehicle that qualifies for the tax credit. The first hybrid vehicle that Chrysler plans to market is a hybrid version of the popular Dodge Ram in 2010.
After a car manufacturer sells 60,000 hybrids, new car buyers get a credit that is much smaller than they may have expected. The first cut in the tax credit reduces it by half. The the credit is only one quarter of its original value. The credit will eventually be phased out, so hybrid buyers that expect a tax credit should research their options before they buy.
The tax credit for the Prius was $3150 when it debuted and continued through for cars purchased until September 30, 2006, but for cars bought between April 1, 2007 and September 30, 2007 the credit had dropped to $787.50.
Honda hit the magic 60,000 car mark during the third quarter of last year, so its credits are alos being phased out like the Toyota’s credit.












