How to Take Advantage of Incentives on Hybrid Vehicles

The advantages of hybrid vehicles don't end at increased gas mileage and environmental friendliness. The government now rewards hybrid vehicle owners with tax incentives. Take advantage of these tax breaks:

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Hybrid vehicle
• Internet connection
• Computer

1. Buy a qualifying hybrid vehicle. Check the IRS Web site (see Resources) for a list of qualifying vehicles and the tax credit for each.

2. Keep all your paperwork. The purchase and date of delivery of the hybrid vehicle must be shown through appropriate documentation.

3. Claim the hybrid income tax credit. For dealers, fill out form 8910. For normal consumers, simply fill out the amended 1040X tax return form for the year 2006.

4. Claim "clean fuel" tax deduction. This is for vehicles purchased before 2005 and is different from the hybrid income tax credit. When you fill out your 1040, write in the amount of the deduction with the words "clean fuel" next to line 36.

5. Check out local incentives! Contact state and local governments for information. You may also be eligible to receive stickers that allow you to use carpool lanes — call your local DMV to find out.

Tips & Warnings

• Make sure you took possession of your vehicle after Dec. 31, 2005, and you purchased it before Dec. 31, 2010.
• Make sure credits are still available for your make and model. Credits phase out after 60,000 cars are sold from a particular manufacturer.
• Tax breaks only apply to new vehicles.
• Be aware that leasing a hybrid vehicle does not qualify for a tax credit.