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Sometime in 2008, an unknown and unsuspecting hybrid buyer will drive the one-millionth gas-electric vehicle off a dealership lot and onto an American roadway. There’s more than one reason for the ascent of hybrids from zero to one million in about seven years. Any single buyer might take the hybrid plunge for one particular reason, several reasons, or all reasons, including: squeaky clean emissions, champion fuel economy, reducing use of imported oil, or the allure of cool new technology. It’s the Chinese menu “something for everybody” approach to car buying. Thanks to a host of local, regional, and federal hybrid incentives and perks—from tax credits to preferred parking—the hybrid menu is becoming even more enticing and accessible.
Federal Tax Credits
New and improved hybrid car incentives—full-dollar tax credits—took effect on Jan. 1, 2006. For most hybrid car buyers, the new credits are more valuable than the prior federal tax incentives, which were only offered as reductions of taxable income. The IRS has ruled on credit amounts for all hybrids and has posted a summary of the hybrid tax credits, and the appropriate forms. The exact amount of your credit may vary. Please consult a tax professional.
2008 |
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| Make | Model | Tax Credit | |
| Ford | Escape Hybrid 2WD | $3,000 | |
| Ford | Escape Hybrid 4WD | $2,200 | |
| Mercury | Mariner Hybrid 2WD | $3,000 | |
| Mercury | Mariner Hybrid 4WD | $2,200 | |
2007 |
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| Chevrolet | Silverado 2WD Hybrid Pickup Truck | $250 | |
| Chevrolet | Silverado 4WD Hybrid Pickup Truck | $650 | |
| Ford | Escape Hybrid 2WD | $2,600 | |
| Ford | Escape Hybrid 4WD | $1,950 | |
| GMC | Sierra 2WD Hybrid Pickup Truck | $250 | |
| GMC | Sierra 4WD Hybrid Pickup Truck | $650 | |
| Honda | Accord AT | $1,300 | |
| Honda | Accord Navi | $1,300 | |
| Honda | Civic CVT | $2,100 | |
| Lexus | GS450h | Purchase Date | |
| 1/1/06-9/30/06 | $1,550 | ||
| 10/1/06-3/31/07 | $775 | ||
| 4/1/07-9/30/07 | $387.50 | ||
| After 10/1/07 | $0 | ||
| Lexus | RX400h 4WD | Purchase Date | |
| 1/1/06-9/30/06 | $2,200 | ||
| 10/1/06-3/31/07 | $1,100 | ||
| 4/1/07-9/30/07 | $550 | ||
| After 10/1/07 | $0 | ||
| Lexus | RX400h 2WD | Purchase Date | |
| 1/1/06-9/30/06 | $2,200 | ||
| 10/1/06-3/31/07 | $1,100 | ||
| 4/1/07-9/30/07 | $550 | ||
| After 10/1/07 | $0 | ||
| Lexus | GS 450h | $1,550 | |
| Lexus | RX 400h | $2,200 | |
| Mercury | Mariner Hybrid 4WD | $1,950 | |
| Saturn | Vue Green Line | $650 | |
| Toyota | Camry Hybrid | Purchase Date | |
| 1/1/06-9/30/06 | $2,600 | ||
| 10/1/06-3/31/07 | $1,300 | ||
| 4/1/07-9/30/07 | $650 | ||
| After 10/1/07 | $0 | ||
| Toyota | Prius | Purchase Date | |
| 1/1/06-9/30/06 | $3,150 | ||
| 10/1/06-3/31/07 | $1,575 | ||
| 4/1/07-9/30/07 | $787.50 | ||
| After 10/1/07 | $0 | ||
| Toyota | Highlander Hybrid | Purchase Date | |
| 1/1/06-9/30/06 | $2,600 | ||
| 10/1/06-3/31/07 | $1,300 | ||
| 4/1/07-9/30/07 | $650 | ||
| After 10/1/07 | $0 | ||
The basic rules:
- The vehicle must be placed in service after 12/31/05 and purchased on or before 12/31/10.
- The original use of the vehicle must begin with the taxpayer claiming the credit. The credit may only be claimed by the original owner of a new, qualifying, hybrid vehicle and does not apply to a used hybrid vehicle.
- The vehicle must be acquired for use or lease by the taxpayer claiming the credit. The credit is only available to the original purchaser of a qualifying hybrid vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit. For qualifying vehicles used by a tax-exempt entity, the person who sold the qualifying vehicle to the person or entity using the vehicle is eligible to claim the credit, but only if the seller clearly discloses in a document to the tax-exempt entity the amount of credit.
- The vehicle must be used predominantly within the United States.
These rules are relatively straight-forward. But there’s more— and these are more foggy:
- The new tax credit sets a limit of 60,000 hybrids per carmaker. Toyota hit the 60,000 mark in June, 2006. (Honda and Ford are unlikely to reach 60,000 hybrids in 2006.) Buyers who purchased one of the five gasoline-electric hybrid models sold by Toyota and Lexus before Sept. 30 will qualify for 100 percent of the credit. After Oct. 1, the credit amount listed above will be reduced by half.
- The credit for Toyota hybrids will stay at 50 percent for two quarters, fall to 25 percent in the subsequent two quarters, then expire on Oct. 1, 2007.
- The credit amount is based on the purchase date of the vehicle.
- The new law for the hybrid tax credit might require taxpayers to recapture their hybrid tax credit if they re-sell their hybrid car or truck.
Surprisingly, for taxpayers who take a lot of deductions or use the Alternative Minimum Tax, the previous tax deduction (which bit the dust in 2005) was more valuable. Details:
- The credit will not reduce your alternative minimum tax, if that applies to you. As stated in Toyota’s statement about the new tax credits: “The benefit of the hybrid vehicle tax credit will also be substantially reduced or eliminated if the individual purchaser is subject to the federal alternative minimum tax.”
- The credit will reduce your regular income tax liability, but not below zero.
- If you are eligible for multiple tax credits, the hybrid tax credit is taken last after all the other credits (e.g., child care tax credit, mortgage credit, retirement savings credit) have been taken. Any tax liability left over by these reductions will be the maximum dollar limit of your hybrid tax credit. If your hybrid tax credit exceeds your maximum dollar limit, the excess is not refundable, and is lost forever.
- The excess cannot be carried over to another year, or given away to another person.
As you might guess, it’s a good idea to get advice from a tax professional before filing.
Regional, State & Local Incentives
If you like, we could get into a heated debate about the wisdom of offering local-based perks to hybrid buyers, when it’s likely that the little freebies, like free municipal parking, aren’t likely to sway a car shopper one way or the other. It’s probably not worth the effort. After all, politicians need some way to send a message that oil dependency, global warming, and air quality are critically important issues. Whether you think these incentives represent sound transportation policy, or just cheap moves to curry favor with voters, more incentives for hybrids and other automotive alternatives are going to keep coming down the pike.
It’s not easy keeping track of the latest incentives and rebates across the country —so please verify exact current rulings with appropriate state or city officials.
| Arizona | On Feb. 9, 2007, the Arizona Department of Transportation and Gov. Janet Napolitano announced that three hybrid models.the Honda Insight, Honda Civic Hybrid, and Toyota Prius.are now permitted to use car pool lanes on freeways in Arizona. The decision clears the way for the estimated 9,000 Toyota Prius, Honda Insight and Honda Civic Hybrid vehicles in Arizona to use the carpool lanes, regardless of the number of passengers. The state plans to issue 10,000 hybrid-vehicle permits on a first-come, first-serve basis. |
| California | The State of California is no longer issuing decals to hybrid drivers for use in high occupancy vehicle (HOV) lanes.
Hybrid Car owners who have purchased their hybrids from San Jose dealers are exempt from local parking fees. For eligibility, contact Jason Burton (408) 794-1427, jason.burton@ci.sj.ca.us. If you own a Zero Emission Vehicle or Super Ultra Low Emission Vehicle as defined by the California Air Resources Board, you may purchase a California Clean Air Vehicle Decal from the California Department of Motor Vehicles. Once you have purchased and affixed the decal to your vehicle per DMV instructions, you can park without depositing coins at on- and off-street metered parking spaces throughout the City of Los Angeles. For more information, visit: http://www.lacity.org/LADOT/FreePark.htm If your vehicle has the decal affixed to your alternative fuel, hybrid or electric vehicle, the Santa Monica Municipal Code (3.16.120) allows you to park in any metered parking space in the city without charge for the maximum amount of time allowed by that meter. In other words, if you.re at a 2-hour meter, you can park there free for 2 hours.but beyond that, you.re subject to ticketing for overstaying your welcome. Clean Air Vehicle decals are issued by the state. |
| Colorado | The Colorado Department of Revenue offers a tax credit for the purchase of a hybrid electric vehicle (HEV), up to $4,713.00. For more information, including tax credit amounts for Model Year 2002 and 2003 HEVs, please visit http://www.revenue.state.co.us/fyi/html/income09.html. (Reference Colorado Revised Statutes (CRS) §39-22-516 and §39-33-102.)
The following vehicles are exempt from emissions testing: Toyota Prius and Honda Insight. For questions about other vehicles, contact your county motor vehicle office. Colorado has passed legislation that would allow the hybrids to use the HOV lanes with single occupants. While a federal waiver has been passed, the Colorado Department of Transportation is analyzing that bill and state for compatibility. The EPA has up to 180 days to give the states guidelines for which vehicles would be allowed into HOV lanes pursuant to the new federal law. Hybrid vehicles registered in the city of Aspen are eligible for a $100.00 rebate on license registration is allowed to park with impunity in the city’s residential and carpool zones. Owners must register the vehicle with the Parking Department. |
| Connecticut | The purchase of hybrid electric vehicles (HEVs) with a fuel economy rating of at least 40 miles per gallon (mpg) and the original purchase of dedicated natural gas, LPG, hydrogen, or electric vehicles are exempt from sales tax. On June 6, 2005, the city of New Haven passed a law permitting hybrid vehicles registered in New Haven free parking at metered spots within the city. The ordinance will take effect within one month and only apply to alternative fuel vehicles registered in New Haven. Owners will have to come to City Hall to receive a decal which will be attached the to vehicle. Motorists will still need to obey posted time limits and must park in legal spots. For more information contact DSlap@Newhavenct.net. |
| District of Columbia | The DMV Reform Amendment Act Of 2004 went into effect on April 15, 2005. It exempts owners of hybrids and other alternative fuel vehicles from excise tax and reduces vehicle registration charges. For more information, contact Elizabeth.Berry@dc.gov or Corey.Buffo@dc.gov. |
| Florida | Inherently low-emission vehicles (ILEVs) and hybrid electric vehicles (HEVs) may be driven in high occupancy vehicle (HOV) lanes at any time regardless of vehicle occupancy. ILEVs and HEVs that are certified and labeled in accordance with federal regulations may be driven in HOV lanes at any time, regardless of the number of passengers in the vehicle. The vehicle must have a decal issued by the Florida Division of Motor Vehicles, obtained for a $5 fee, which must be renewed annually. For more information, please contact the Florida Division of Motor Vehicles at dmv@hsmv.state.fl.us or (850) 922-9000. (Reference Florida Statutes 316.0741) |
| Georgia | Hybrid electric vehicles (HEVs) shall be authorized to use high occupancy vehicle lanes, regardless of the number of passengers. The term ‘alternative fuel vehicle’ is expanded to include HEVs. A HEV is defined as a motor vehicle, which draws propulsion energy from onboard sources of stored energy, which include an internal combustion or heat engine using combustible fuel and a rechargeable energy storage system. HEVs must also meet federal Clean Air Act and California emissions standards and must have a fuel economy that is 1.5 times the Model Year 2002 EPA composite class average for the same vehicle class. (Reference Georgia Code Section 40-2-76) |
| Illinois | The Illinois Alternate Fuels Rebate Program (Rebate Program) provides rebates for 80% of the incremental cost of purchasing an AFV or converting a vehicle to operate on an alternative fuel. The maximum amount of each rebate is $4,000. Eligible vehicles include natural gas, propane, and electric. Gasoline-electric hybrid vehicles are not eligible.
The City of Wilmette raised its vehicle sticker fee to $75, providing a discount only to vehicles that meet the EPA.s SmartWay or SmartWay Elite criteria. Only two models sold in Illinois, the Honda Civic Hybrid and Honda Civic GX NGV, qualify for the SmartWay Elite designation and reduced fee ($25), though more cars qualify for the Smart Way designation and reduced fee ($50). In 11/06, the Frankfort Village Board voted to waive the $5 registration sticker fee for hybrid vehicles. |
| Louisiana | The Louisiana Department of Natural Resources offers a state income tax credit worth 20% of the cost of converting a vehicle to operate on an alternative fuel, and 20% of the incremental cost of purchasing an Original Equipment Manufacturer (OEM) alternative fuel vehicle (AFV). For the purchase of an OEM AFV, the tax credit cannot exceed the lesser of 2% of the total cost of the vehicle or $1,500. Only those vehicles registered in Louisiana can receive the tax credit. For more information, please contact the Louisiana Department of Natural Resources at (225) 342-1399 or the Louisiana Department of Revenue at (225) 219-0102, option 2. (Reference Revised Statutes (RS) S47:38 and S47:287.757). The Louisiana department of revenue concluded that “The cost of equipment involved in converting to a hybrid vehicle or installed by a manufacturer of hybrid vehicles can be used to compute this credit.” Note: The Revenue Ruling No. 02-019 November 8, 2002 established the department’s position on allowing hybrids vehicles to receive this credit. However, a Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the department’s position and is binding on the department until superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision. |
| Maine | Maine’s partial sales tax for hybrids expired on January 1, 2006. For questions, contact Melissa Morrill at Maine Department of Environmental Protection. |
| Maryland | H.B. 61 exempts qualified hybrid electric vehicles from motor vehicle emissions testing requirements. Owners of hybrid cars will get discounts on parking at the 15 city-owned parking garages in Baltimore. The plan cuts between 32- and 85 dollars from the monthly fees for owners of the fuel-efficient vehicles. Baltimore will limit participation to 200 vehicles and the program will apply only to monthly, contract parking. Drivers of the three most fuel-efficient models can apply for a decal that will let them park in designated spots in the city’s garages. |
| Massachusetts | NOT YET APPROVED (3/1/06): For the years 2006-2010, individuals that purchase a hybrid or alternative fuel vehicle, which can be powered by ethanol, low-sulfur diesel, compressed natural gas, liquefied natural gas, and hydrogen will register for a special placard and receive a number of incentives, including: an income tax deduction of $2000; the right to travel in HOV lanes regardless of passengers; and discounts or free parking in municipalities which choose to participate. The bill will require that five percent of all new state agency “fleet vehicles” be hybrids or run on alternative fuel, with 50 percent of the state fleet reliant on alternative fuels by 2010. A $10 million bond would establish a fund controlled by the Division of Energy Resources to assist municipalities and regional transit authorities in building alternative fuel stations on public lands and acquiring alternative fuel vehicles or hybrids. Corporations with fleets of more than 50 comprised of at least 10 percent alternative fuel vehicles would receive a tax credit of half the difference in price between those vehicles and their conventional gasoline counterparts.
The town of Williamstown, Massachusetts launched a program which offers owners of 2003-2007 model hybrids and other fuel-efficient vehicles registered in the town a reimbursement grant of up to 75 percent of the state motor vehicle excise tax paid. For vehicles that have an EPA-rated fuel economy of at least 50 miles per gallon (city), owners can get up to 75 percent of the excise tax due in fiscal year 2007. Owners of vehicles with an EPA-rated fuel economy of at least 30 miles per gallon (city) can apply for a reimbursement grant of 50 percent of the state motor vehicle excise tax paid. You can access the grant application by visiting http://www.williamstown.net/2007 - 2 fuel efficient vehicle application.doc |
| Michigan | The city council of Ferndale passed an ordinance that allows free parking at city meters for drivers of hybrids and other vehicles that average 30 miles per gallon or more in city driving. Owners of eligible automobiles must register and pay an annual fee in order to get a permit for the exemption. The exemption began 09/01/06. To find out if your car qualifies, call the City Assessor at (248) 546-2372 from 8 a.m. to 5 p.m. weekdays. |
| Montana | The new Bozeman Public Library has reserved some of its prime parking spaces for hybrid and carpool vehicles. The library is seeking Leadership in Energy and Environmental Design (LEED) certification for its new building, which has incorporated other sustainable building design and construction concepts. |
| New Jersey | On May 4, 2006, the New Jersey Turnpike Authority, which administers the turnpike and the Garden State Parkway, voted to allow hybrid vehicles to use the high occupancy vehicles lanes on the turnpike.The ruling’s effect may be limited since the turnpike, which sees an average of 700,000 drivers daily, has HOV lanes only between Interchange 11 in Woodbridge and Interchange 14 in Newark going both northbound and southbound. The Garden State Parkway does not have car pool lanes. Decals are not required. Turnpike Authority officials said state police do not anticipate any problems identifying which cars are hybrids. |
| New Mexico | Hybrid electric vehicles (HEVs) with a U.S. Environmental Protection Agency (EPA) fuel economy rating of at least 27.5 miles per gallon are eligible for a one-time exemption from the motor vehicle excise tax and state sales tax. In Albuquerque, hybrid cars are exempt from parking meter fees. For more information, visit: http://www.cabq.gov/parking/HybridPermits.html. Or call The City of Albuquerque’s parking office at 505-924-3950. Contact Deborah James: Djames@cabq.gov (505) 768-3036 |
| New York | New York’s Alternative Fuel (Clean Fuel) Vehicle Tax Incentive Program, which offered tax credits and a tax exemption for purchasing new hybrid electric vehicles (HEVs), have expired. In Jan. 2006, Governor Pataki proposed new incentives. For more information, please contact the New York State Energy Research & Development Authority (NYSERDA) at 866- NYSERDA, via email at info@nyserda.org, or visit the web site at http://www.nyserda.org. Clean Pass is a program allowing eligible low-emission, energy-efficient vehicles to use the 40-mile Long Island Expressway High Occupancy Vehicle (LIE/HOV). Clean Pass is a multi-agency pilot program partnering three New York State agencies, the State Department of Transportation (NYSDOT), the State Department of Motor Vehicles (DMV), and State Department of Environmental Conservation (DEC).
In Westchester, starting in January 2006, hybrid vehicle owners will be allowed to park for free at two county-owned commuter lots. The cost of a monthly permit is usually $75.00. The county has about 1,100 commuter spaces available at two lots . about 200 of them on Central Avenue in White Plains at the Westchester County Center and the other 900 on Fisher Avenue in North White Plains, near the train station. For more information, contact County Legislator Martin Rogowski at mlr1@westchestergov.com. Starting Jan. 1, 2006, the Town of Huntington will allow hybrids and alternative-fuel vehicles, affixed with special .Keep Huntington Green. window stickers, free parking at town meters, free access to all Huntington beaches, and free commuter parking at any of the town.s four Long Island Rail Road stations. |
| Oregon | A Residential Tax Credit of up to $1,500 is available for the purchase of a HEV or dual-fuel vehicle. For more information, contact Deby Davis of the Oregon Department of Energy at (503) 378-8351, via email at deby.s.davis@state.or.us. You can also find detailed information about qualifying vehicles at: http://egov.oregon.gov/ENERGY/TRANS/hybridcr.shtml.
A Business Energy Tax Credit is available for the purchase of hybrid electric vehicles (HEVs) and dual-fuel vehicles, the cost of converting vehicles to operate on an alternative fuel, and the cost of constructing alternative fuel refueling stations. The tax credit is 35% of the incremental cost of the system or equipment and is taken over five years. A joint partnership between the Oregon Environmental Council and City Center parking offers A $15 per month discount on monthly parking for hybrid vehicles that get an estimated 35 miles per gallon or more for either city or highway driving. More details on the program can be found at http://www.citycenterparking.com/Drive_Green/drive_green.htm. |
| Pennsylvania | Pennsylvania’s Department of Environmental Protection will offer an opportunity to Commonwealth residents to apply for a rebate to assist with the incremental cost for the purchase of a new hybrid, bi-fuel, dual-fuel or dedicated alternative fuel vehicle. The rebate amount is $500. The rebate will be offered as long as funds are available. Rebates will be offered on a “first come, first served” basis. Rebate applications shall be submitted no later than six months after the purchase.
Press release issued by the Commonwealth of Pennsylvania on March 9, 2006: The program has been so successful, the state is expect to run out of rebate money sometime in April. DEP Secretary Kathleen A. McGinty said the commonwealth already has awarded more than $1.3 million in rebates from the $1.5 million allotted for the program for the 2005-06 fiscal year. Another $1 million will become available for the fiscal year beginning July 1. Because buyers have six months from the time of the purchase to apply for the rebates, people buying hybrid electric and alternative fuel vehicles after the current funding runs out still will be able to apply for rebates when the programs reopens. For more information, visit the Commonwealth of Pennsylvania website. |
| South Carolina | Consumers buying hybrid vehicles are provided a state tax credit equal to 20 percent of the federal tax credit scheduled to begin in tax year 2006. The state tax credit amount is calculated without regard to the phase-out period limits of Internal Revenue Code Section 30. H 4312 was introduced 01/16/06 and signed into law 6/1/06. |
| Texas | The City of Austin’s “Drive Clean–Park Free” program gives city-registered owners of hybrid vehicles that receive an EPA air pollution score of 8 or better a $100 pre-paid parking cards to park in any of the city’s 3,700 parking meters. Owners must submit an application to the city and receive a bumper sticker showing their participation in the program. Eligible vehicles must be purchased at certified dealerships within the Austin City Limits. For more information go to http://www.ci.austin.tx.us/airquality/parkfree.htm. The City of San Antonio allows owners of hybrid vehicles to park for free at street parking meters. A City ordinance, which took effect immediately after City Council approval on May 4, 2006, requires all owners wishing to take advantage of the one-year pilot program to register their hybrid vehicles with the City’s Parking Division located at 243 N. Center Street. Registered hybrid vehicle owners can park at any of the City’s 2,010 street parking meters without charge, including the pilot Pay & Display locations. All drivers must follow street parking meter rules such as parking for only the time allotted at the respective meter. For more information, call (210) 207-8266. |
| Utah | Vehicles with clean fuel group license plates are authorized to travel in HOV lanes regardless of the number of occupants. The clean fuel plate may be purchased for $15 from any Motor Vehicle Division office by presenting a clean special fuel certificate. This incentive expires December 31, 2010, as extended by 2005 House Bill 96. For more information, please contact the Utah State Tax Commission’s Motor Vehicle Division at (800) DMV-UTAH or (801) 297-7780, or visit: http://dmv.utah.gov/licensespecialplates.html.
The state’s tax credit for “electric-hybrid” is no longer active. Salt Lake City grants free metered parking to vehicles powered solely by an alternative fuel (i.e. propane, compressed natural gas, or electricity) or that are “top performers” in regards to city fuel economy or emissions. All available hybrids qualify. For details, including information about “Green Vehicle” parking permits, visit: http://www.slcgov.com/transportation/parking/green.htm. |
| Virginia | On March 20, 2007, Virginia Gov. Timothy M. Kaine signed into law an extension that will give vehicles with “clean special fuel vehicle” license plates special access to express lanes. These vehicles are allowed to drive in high occupancy toll lanes with only one passenger, but that exception was going to expire this July. Now, that exception will expire July 1, 2008.
The following vehicles qualify for the exception: Toyota Prius, Honda Insight, Honda Civic, 2005 Ford Escape, 2006 Ford Escape, 2006 Toyota Highlander, 2006 Lexus RX400, 2006 Mercury Mariner, 2006 Honda Accord, 2007 Toyota Camry, 2007 Lexus GS450h, 2007 Ford Escape, 2007 Mercury Mariner, 2007 Honda Accord and 2007 Toyota Highlander. For more information, please visit the Virginia Department of Motor Vehicles Web site at www.dmv.state.va.us/webdoc/citizen/vehicles/cleanspecialfuel.asp (Reference Virginia Code §33.1-46.2 and §46.2-749.3) |
| Washington | Electric, CNG, and LPG vehicles are exempt from emission control inspections. Effective June 13, 2002, hybrid motor vehicles that obtain a rating by the U.S. Environmental Protection Agency of at least 50 miles per gallon of gas during city driving are also exempt from these inspections. (Reference RCW 46.16.015) |
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