Unless further legislation is enacted, the tax credit for hybrid vehicles will expire after Dec. 31, 2010.
Strategy: Make your move. If you’re in the market for a hybrid, you may want to take advantage of a current deal, with a tax break to boot.
However, be aware that the tax credit is reduced or no longer exists for some of the top-selling models (see box below).
Actually, the tax law allows four variations of the “alternative motor vehicle credit” for vehicles placed in service before 2011. But the hybrid vehicle credit is by far the most popular. The credits apply to purchases and leases of new vehicles for use in the United States.
The IRS certifies a particular make and model as being eligible for the credit. The exact amount of the hybrid vehicle credit depends on a computation involving the mileage savings and the fuel economy for the car’s weight class. The better the vehicle’s performance, the higher the credit.
Caution: The credit begins to phase out in the second calendar quarter after the calendar quarter in which at least 60,000 of the manufacturer’s qualified passenger automobiles and light trucks have been sold. Once the manufacturer hits the 60,000 mark, the credit for all hybrid models it produces are reduced by 50% for a six-month period and then by 75% for the following six-month period. Finally, the credit disappears for good.
Tip: The IRS regularly updates the information on hybrid vehicles. Visit the IRS web site at www.irs.gov.
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