Hybrid
Car Owners: IRS Incentives
by SolveYourProblem.com
The
hybrid car has not come into the world without a shroud of
rumors following carefully behind. From rumors of exploding
batteries, electrical and digital nightmares, and poorly met
expectations letting down consumers, the hybrid has had to
struggle to overcome many misconceptions. Makers have not let
myth and rumor keep them from creating better hybrids in new
and old models. Toyota, Ford, Lexus, Honda, Nissan, Mazda,
Dodge, Chevy, GM and Saturn are either in the process of creating,
or have already, released several high performing hybrids.
A total of 20 hybrid models are available, or are soon to be
so. With just about every maker producing hybrids,
incentives to keep the industry rolling are filling up the
market with
a fresh batch of rumors. The IRS is stepping up to explain
as clearly as they can, what some of these options for the
buyers of the most fuel efficient vehicles, really are shaping
up to be. The “Clean Vehicle” adjustment being used for personal
and business owners is helping to encourage the purchase of
hybrid vehicles.
Some may still be skeptical since gas markets are so closely
linked with politics for most of the world. The truth is that
the government is actually interested in getting away from
foreign fuel dependency. Getting more people to spend the extra
money on a hybrid is being encouraged to help the market. The
IRS is playing a major role in these incentives by offering
tax credits. The catch is that some of these credits have limits
based upon how many hybrids are sold of each model. After a
point, the credits will be phased out. On the Federal level,
these credits run from a few hundred dollars to more than $2,500
for purchasing the2006 Ford Escape. Apparently, like most IRS
laws, the calculations for the credits are a complicated jumble
of formulas based on how many of a model is sold, over a particular
period of time. Luckily, most buyers of hybrids are successfully
receiving the credits. Buying a Toyota or Honda hybrid requires
that you are one of the first 60,000 people to purchase one
starting in January 2006. The amount of the credit also depends
on which percentage of the tax bracket one falls into. Buyers
of hybrids in 2004 or 2005 were able to claim as high as a
$2,000 deduction on their taxes. For those in the 15% tax bracket,
the deduction fell to about $300.
The
tax credits are based on the Working Families Tax Relief
Act of 2004. According to the IRS, the credits will be phased
out after 2006 and must be claimed for the year that the hybrid
was purchased. Luckily, one can claim the back credit for up
to three years from the purchase of the hybrid by using the
1040X form, or the Amended U.S. Individual Tax Return form.
Another form related to hybrid owners is the IRS Publication
535. Mostly used for business expenses, this form can be used
for almost anyone who owns a hybrid, whether or not they use
it for business purposes.
While
hybrid owners are also getting incentives on the state
level with their state income tax returns and also with
special
car pool or HOV lane privileges, some believe that the incentives
on the Federal level should be even better. For example, the
fact that the incentive will be as little as $500 for 2006,
and thereafter, nonexistent, does not give many people time
to catch up with the extra money they will need to purchase
a hybrid vehicle in the first place. Many see the mainstream
entry of hybrids into the automobile market as the sign that
fuel efficiency and environmental concerns are becoming part
of the American culture. One offset to the phase out of tax
incentives for the purchase of hybrids is that the prices themselves
are more attainable with each year. Right now, most people
have to pay $5,000 to $9,000 more for a hybrid version of the
car or SUV they want. That number is a little more than most
people are ready to pay yet, but with almost every major maker
of vehicles producing hybrids, it is foreseeable that hybrid
prices will get lower with each passing year, whether or not
incentives are offered by the government.
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SolveYourProblem.com : 2007
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