What Kind of Tax Benefit Will I Receive?

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Since 2005, the IRS has started giving tax credits to individuals who are embracing “green” technologies. Earlier there was a clean fuel burning deduction in operation under which only gas-electric hybrid automobiles enjoyed tax credits, but in 2005 it was replaced by the Energy Policy Act.

According to this act a tax credit is subtracted directly from the total amount of federal tax owed by the taxpayer, thus reducing or even eliminating the taxpayer’s tax obligation. In case you are confused as to whether your vehicle qualifies for the tax credit, then you can also seek additional information from the car manufacturer or your local dealer.

If you have purchased, your hybrid vehicle after January 1, 2006, then you as a taxpayer, qualify for this tax credit. This tax credit is also applicable if you have placed your car in service after this date.

A hybrid vehicle is defined to have drive trains powered by both an internal combustion engine and a rechargeable battery. Also, most of the current hybrid vehicles qualify for the tax credit.

It’s important to note here that the credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.

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