Your Hybrid Cars

Just like anything else that’s new, the hybrid car is also not free from rumors. The hybrid car has had to fight loads of misconceptions, some as far-fetched as exploding batteries! Fortunately, manufacturers have not allowed myth and rumor to keep them from making better hybrids in new as well as old models. Toyota, Ford, Lexus, Honda, Nissan, Mazda, Dodge, Chevy, GM and Saturn are in the process of creating, or have already come out with several high performing hybrids. Nowadays, a total of 20 hybrid models are available, or will be soon. With almost every maker producing hybrids, incentives to keep the industry alive are filling up the market with a new batch of rumors. The IRS is trying up to explain as clearly as they can, some of these options available to the buyers of the most fuel efficient vehicles. The “Clean Vehicle” adjustment being used for personal and business owners is meant to help encourage the buying of hybrid vehicles.

Some people may still be skeptical because gas markets are so closely linked with politics in most of the world. The truth however is that the government actually wants to get away from foreign fuel dependency. Making more people spend the extra money on a hybrid is thus being encouraged to help the market grow. By offering tax credits, the IRS is playing a major role in these incentives. The catch here is that some of these credits may have limits based upon how many hybrids are sold per model. At some point, the credits will be phased out. On the Federal level, these credits may run from a few hundred dollars to more than $2,500 for purchasing the2006 Ford Escape. It looks like, similar to most IRS laws, the calculations for the credits are a complicated jumble of formulas depending on how many of a model is sold, over a particular period of time. Fortunately, most buyers of hybrids are successfully benefiting from the credits. To get credits while buying a Toyota or Honda hybrid, you have to be one of the first 60,000 people to purchase one starting in January 2006. The amount of the credit offered also depends on which percentage of the tax bracket you fall into. Buyers of hybrids in 2004 or 2005 claimed as high as a $2,000 tax rebate. For those in the 15% tax bracket, the deduction dropped to about $300.

These tax credits are based on the Working Families Tax Relief Act of 2004. The IRS says that the credits will be phased out after 2006 and have to be claimed for the year that the hybrid was purchased. Luckily, you can claim the back credit for a maximum of up to three years from the purchase of the hybrid by means of the 1040X form, or the Amended U.S. Individual Tax Return form. One more form relevant to hybrid owners is the IRS Publication 535. Usually used for business expenses, this form can also be used for almost anyone who owns a hybrid, even if they don’t use it for business purposes.

Though hybrid owners also get incentives on the state level with their state income tax returns and with the special car pool or HOV lane privileges, some people believe that the incentives on the Federal level could be much better. For example, the very fact that the incentive is as little as $500 for 2006, and thereafter, nonexistent, will not give too many people time to catch up with the extra money they will require to purchase a hybrid vehicle in the first place. Many see the mainstream entry of hybrids into the automobile market as a sign that fuel efficiency and environmental concerns are slowly becoming a major part of the American culture. One offset to the tax incentives phasing out of for the purchase of hybrids is that the prices themselves will be more attainable with each passing year. Today, most people have to pay $5,000 to $9,000 more for a hybrid version of the car or SUV that they want. This is a little more than most people are willing to pay yet, but with almost every major maker of vehicles producing hybrids, it is getting obvious that hybrid prices will reduce with each passing year, whether incentives are offered by the government or not.