How to Take Advantage of Tax Breaks on Hybrid Vehicles
Owning a hybrid vehicle has many advantages. The government is encouraging consumers to drive hybrid vehicles by offering tax breaks as well as other incentives. Take advantage of every single incentive, be it federal tax break, local tax break, savings on fuel or preferred parking.
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Instructions
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Own a qualifying hybrid vehicle. Ask the dealer or check the IRS Web site (see below) for a list of qualifying vehicles and tax credits available.
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Keep track of documents. You'll be claiming your deductions on your tax return, so be able to prove it if you get audited.
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Deduct your taxes for "clean fuel." If you purchased your hybrid vehicle before 2005, you can write in this deduction on your 1040 tax return form. Simply write in the amount along with the words "clean fuel" on line 36.
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Claim the hybrid income tax credit. This is different than the "clean fuel" deduction and is intended for those who purchased a new vehicle after 2005. For this credit, fill out the amended 1040X when you file your taxes.
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Talk to your insurance company. Or shop around. There is a growing trend of insurance companies offering discounts of up to 10 percent for owners of hybrid vehicles.
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Research local incentives! (See Resources below.) Ask your state and local governments. Also, check with your local DMV to see if you are eligible to use carpool lanes.
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Tips & Warnings
Some parking garages offer free parking for hybrid vehicles.
Credits phase out after 60,000 cars from each manufacturer has been sold. The credit will diminish the longer you wait.
Make sure you took possession of your car after Dec. 31, 2005, and purchased it before Dec. 31, 2010, if you are looking to get the hybrid income tax credit.
Tax breaks apply primarily to new vehicles.
You must own a hybrid vehicle to be eligible for the hybrid income tax credit. Leasing does not count.
