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The Center for Financial, Legal & Tax Planning,
Inc. |
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Advisories
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THE
HYBRID VEHICLE TAX CREDIT Introduction Gas is now above $4 a gallon across the
country!!! The sudden rise in gasoline
prices has been fairly detrimental to businesses and families alike. With the higher prices, Americans are
looking to conserve gas and money in any way practical in order to make
travel more budget friendly and affordable.
There are many practical solutions such as: driving less, combining
trips or even walking instead of driving While cheap solutions abound, such as those listed
above, many people are prone to buy fuel efficient cars such as hybrids. Hybrid vehicles convert the energy from an
internal combustion engine into electrical current. In the process of utilizing energy in this
manner, driving in cities and highways becomes more efficient and thus less
expensive for drivers mile-by-mile. Congress
has seen the need to encourage proliferation of this technology and has passed
an energy based law allowing tax credits to individuals and businesses alike
who buy a qualifying hybrid vehicle. THE HYBRID VEHICLE TAX
CREDIT As part of The Energy Policy Act of 2005, Congress
provides a credit to taxpayers that purchase energy efficient property,
including Qualified Hybrid Vehicles.
The tax credit applies to both individuals and businesses. A list of eligible vehicles and their
respective credit amounts can be found by going to www.irs.gov and searching
“qualified hybrid”. Generally, most
hybrids sold in the In order to qualify for the credit, the vehicle
must: a) be placed in service after December 31, 2005 and purchased on or
before December 31, 2010, b) the original use must be with the taxpayer (a used
hybrid does not qualify), c) the vehicle must be acquired for use or lease by
the taxpayer claiming the credit, and d) the vehicle must be used
predominantly within the United States. The credit begins phase out once each manufacturer
sells 60,000 qualifying vehicles. The
phase out is announced once the manufacturer meets its 60,000 car quota and
then the credit lessens to 50% for two quarters, 25% for the next two
quarters, and finally the credit is fully phased out. In order to take the deduction, individuals
fill out form 8910 and attach it to their tax return. Businesses are also eligible to take the
credit. Businesses file form 3800 as
part of the General Business Credit. CURRENT STATUS AMONG
MANUFACTURERS Many hybrids sold are still eligible for this tax
credit. Since the law was passed
nearly 3 years ago, some phase outs apply on some manufacturers. At the time of print of this article, CONCLUSION While the perception is that most hybrid cars are
cramped on space, the fact is that many hybrids are larger vehicles and offer
ample space. The vehicles still
eligible for the deduction included in the Ford, GM, and Nissan line up are
vehicles with ample room and plenty of horsepower. Further, even though the Honda and |
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The Center for Financial, Legal and Tax Planning, Inc. |
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Satellite Office: Longboat Key, FL |
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(618) 997-3436 Fax: (618) 997-8370 © Copyright 2005. All rights reserved. |
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