About Tax Deductions for a Hybrid Car Purchase

Video Transcript

"Hi, we're here today to talk about the tax deductions available for those who purchase hybrid vehicles. The tax deductions are based... they're generated by the IRS on a very complicated formula having to do with mileage per gallon and all that. Your dealer will tell you how much your vehicle will be eligible for, and this is changing because as they sell a certain amount of vehicles, they reduce the amount of credit that is allocated for the vehicles, but as you get into it and your dealer explains it you, he'll give you documents that will tell you exactly what your deduction or your credit will be. There are three criteria that you have to meet in order to claim the credit for the hybrid vehicle. One is you have to purchase the car... you have to purchase a vehicle that qualifies under the IRS as a hybrid vehicle, and thirdly, the car must be used for your personal or your business use and it can't be purchased with the idea that you're going to resell it. There are a number of tax credits that as you are doing your taxes, there is a hierarchy of which credits you will have to take first. The hybrid vehicle tax actually is one of the last credits in a line of about eight or nine credits that you can take, so you have to be aware that you have to go in a certain order of which credits you can apply and in what order you have to apply them. The other last issue is that there is no carry over, so if you buy the car and your deductions and your tax liability is such that you don't... can't take advantage of the tax credit, you lose it, so make sure that if you're purchasing it for that reason, you've got the tax liability that will cover the credit that you're trying to take."