Tax Time (Even More) Complicated for Hybrid Owners

Washington DC Februaru 21, 2007; The AIADA newsletter reported that with April 15th quickly approaching, hybrid owners may be able to recoup some of the cost of their vehicle when they file their 2006 federal taxes.

USA Today reports that taxpayers who bought a hybrid vehicle in 2006 are eligible for a tax credit worth up to $3,150. The amount of the tax credit depends on the vehicle and when it was purchased.

Form 8910, available at www.irs.gov helps taxpayers determine the size of their credit, by calculating fuel economy and lifetime fuel savings.

The credit ranges from $250 for a Chevrolet Silverado hybrid pickup to $3,150 for a Toyota Prius.

The tax credit begins to phase out after an automaker has sold 60,000 hybrids, so some taxpayers who bought a Toyota Prius last year won't be eligible for the full credit.

In addition to the federal tax credits, some states offer incentives for hybrid owners, including free parking to unrestricted access to HOV lanes.

If you're subject to the alternative minimum tax, these may be the only breaks you'll get. Taxpayers who owe the AMT can't use the credit to reduce their federal tax bill.