Tax Credit For Hybrid Vehicles

The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit known as the Alternative Motor Vehicle Credit. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.

Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the credit. Taxpayers may claim the credit on their current year tax returns only if they placed a qualified hybrid vehicle in service in that year. More than 40 different models of hybrids are eligible for the credit.

The credit is available only to the original purchaser of a new qualifying vehicle. If the qualifying vehicle is leased the credit is available only to the leasing company.

To find out whether your car qualifies for the hybrid tax credit and the maximum amount of that credit, you can go to the IRS.gov website and search for “qualified hybrid vehicles.”