Tax credits are few and far between these days (nothing like the rollicking good times of ITC) but, for those of you leasing cars, some credits are available. For example, the IRS recently acknowledged the certification by Toyota Motor Sales that several of its 2006 vehicles and a 2005 model year vehicle qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005. It also has acknowledged the certification by Ford Motor Company’s that several of its 2006 vehicles qualify for the same credit. The tax credit for hybrid vehicles applies to vehicles purchased on or after January 1, 2006, and may be as high as $3,400 for those who purchase the most fuel-efficient vehicles.
The hybrid vehicle certifications recently acknowledged by the IRS and their credit amounts are:
· 2005 Toyota Prius $3,150
· 2006 Toyota Prius $3,150
· 2006 Toyota Highlander 4WD Hybrid $2,600
· 2006 Toyota Highlander 2WD Hybrid $2,600
· 2006 Lexus RX400h 2WD $2,200
· 2006 Lexus RX400h 4WD $2,200
· 2006 Ford Escape Hybrid Front WD $2,600
· 2006 Ford Escape Hybrid 4 WD $1,950
· 2006 Mercury Mariner Hybrid 4 WD $1,950
The alternative motor vehicle tax credit is effective for new qualified hybrid motor vehicles placed in service after 12/31/2005, in tax years ending after 12/31/2005. The term “new qualified hybrid motor vehicle” means a motor vehicle that draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine, and a rechargeable energy storage system. It also must meet or exceed low emission vehicle standards and a maximum available power standard. Furthermore, the original use of the vehicle must commence with the taxpayer, and be acquired for use or lease by the taxpayer (not for resale).
The credit is subject to the limitations of the general business credit and may not be taken on property subject to Section 179 deductions. Furthermore, the basis of any property for which the credit is allowable under must be reduced by the amount of the credit. There also are limitations associated with property used by tax-exempt entities and property used outside the US.
You better hurry, though, as there is a limitation on the number of new qualified hybrid vehicles eligible for the credit. This limitation consists of a phase out period based on the number of qualified vehicles sold. Taxpayers may claim the full credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50% of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25% of the credit. No credit is allowed following the fifth quarter after which the sales targets are met.
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