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Financial Planning > Tax Planning

Buy Those Hybrids Now!

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The Internal Revenue Service announced April 7 the tax credit amounts that taxpayers may claim for the purchase of many new hybrid automobiles. The credit replaces the $2,000 tax deduction taxpayers could claim for the purchase of a hybrid before December 31, 2005 under the Energy Policy Act of 2005. However, the full credit is time limited based on the number of vehicles sold by the manufacturers. As the IRS announcement puts it, “Taxpayers may 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. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.” The IRS certification necessary to qualify for the tax credit has been gained so far only by Toyota and Ford. Here are the tax credit amounts for those vehicles:

Vehicle Year and Model Tax Credit
2005 Toyota Prius $3,150
2006 Toyota Prius $3,150
2006 Toyota Highlander 4WD Hybrid $2,600
2006 Toyota Highlander 2WD Hybrid $2,600
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