Want a Hybrid Vehicle Tax Credit? You Better Act Fast

If you’re thinking about buying that new hybrid vehicle you should know that you may qualify for substantial credit on your federal income tax. But you may need to act fast.

The Energy Policy Act, passed by Congress last year, replaced a tax deduction for buying a hybrid with a credit, which is better for the consumer anyway because the credit subtracts directly from your total tax bill.

The IRS website lists the qualifying vehicles and the amount of tax credit for each (it’s based on each models fuel-efficiency & reduced emissions). For example, buying the Toyota Prius will get your maximum of $3,150 off your federal taxes. You can see all the hybrid vehicle credits here: http://www.irs.gov/newsroom/article/0,,id=157632,00.html

However, there is a reason why I say you may need to act fast. Because of the way the hybrid vehicle tax credit law was made up, how much of that credit you can claim depends on how many hybrids the manufacturer has sold and when they sold them.

After a manufacturer has sold its 60,000th hybrid vehicle of any model, vehicle buyers have until the end of the following calendar quarter to get the whole tax credit. You can claim half the credit if you purchase in the 2nd or 3rd quarter after, or 25% of the credit in the 4th or 5th quarters. After that, you don’t get anything.

According to a Toyota customer service representative, Toyota has already reached the limit and new car buyers have until September 30 to take delivery of a hybrid vehicle if they want to qualify.

Yea, this can be pretty confusing for the buyer. Your best bet is to simply shop around for a hybrid vehicle that you want, and ask the dealer about the tax credit. But, you may need to act fast.