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Starting in 2006, individuals buying hybrid cars will get a tax credit instead of a tax deduction. The IRS has just started to kick out the exact amounts you can claim for your new hybrid.

Credit Pacific Service Union Various Toyota Hybrids Get Tax Credit Certification From IRS

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Credit First Service Union Under the Energy Policy Act of 2005, the tax benefits of owning a hybrid vehicle underwent significant changes. Whereas you could previously claim a tax deduction, the new law converted the deduction into a tax credit. Tax credits are FAR more valuable than deductions, because they reduce the amount of tax you owe on a dollar for dollar basis. Tax Deductions, on the other hand, merely reduce your adjusted gross income prior to determining the amount of tax you owe pursuant to the tax tables. In laymen's terms, this conversion is a very good thing.

On April 1, 2007, the credit for a Prius will again be reduced, to $787.50. After September 30, 2007, purchasers of any Toyota hybrid vehicle will no longer be entitled to the credit. out of the credit applies to all hybrid models of Toyota. The rules for the credit require that the taxpayer purchase a new car and the car not be purchased for resale.

Card Credit Mobile Service Not every hybrid car qualifies for a tax credit. The Internal Revenue Service must first evaluate it and then issue guidance on which cars qualify and the size of the credit you can claim for each. The maximum the IRS can designate per car is $3,400. Here are the numbers it recently kicked out for various Toyota hybrid models.

Not because it's a bad vehicle. But because it's a popular one. In fact, so popular that the tax credit has been reduced because so many have been sold. The hybrid motor vehicle credit is reduced by 50 percent once the manufacturer sells 60, 000 vehicles eligible for the credit. out of the credit. Beginning October 1, 2006, the credit for a Toyota hybrid vehicle will be cut in half. For purchasers of the popular Prius, the credit of $3, 150 will be cut to $1, 575.

Card Credit Discover Service 2005 Toyota Prius: $3150

It has been unclear whether the September 30 deadline would apply to the date that the sales contract is signed, the date the full purchase price is paid, or the date the car is placed in service. According to recent IRS guidance, the amount of the credit should be determined as of the date of purchase, not the date the car is placed in service. service date determines which year's tax return on which the credit will be claimed.

Credit Public Service Union 2006 Toyota Prius: $3150

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Card Credit Processing Service 2006 Toyota Highlander 4WD Hybrid: $2600

Center Credit Service Union 2006 Toyota Highlander 2WD Hybrid: $2600

Card Credit Service Wireless 2006 Lexus RX400h 2WD: $2200

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Credit Report Service If you purchased your hybrid car prior to 2006, you are restricted to claiming a tax deduction in the amount previously designated by the IRS, usually $2,000. If you waited until 2006, you can claim the above amounts with a few hitches. First, the amount only applies to the first 60,000 cars sold for each model. If you purchase a hybrid in the 60,0001 to 120,000 sales range, you can claim only half of the tax credit. Sales 120,001 through 180,000 can claim on a quarter of the amount designated above. Exactly how you are supposed to know the sales figures is a bit murky, but Toyota will undoubtedly take steps to make it clear.

Blogspot Com Christian Hybrid vehicles make sense from an environmental aspect. Throw in significant savings on gas costs and a large tax credit, and they should fly off the lots.

Christian Counseling Credit Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes. Visit us to read more articles about tax deductions and our new tax credits page.

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Rick Chapo is with Nomad Journals - makers of writing journals. He is also with BusinessTaxRecovery.com - information on taxes.