How do the tax breaks for hybrid vehicles work?

Question

I've read about it a little online but wanted some thoughts from people who have actually taken the tax break. The amount of the tax break is not actually the amount you get back, correct?

I'm considering the Mazda Tribute 2WD Hybrid, eligible for a $3000 tax break.

Answer 1

1. You buy the new car that qualifies. (Toyotas don't if purchased after 9/30/2007; Hondas no longer qualify for the full credit.)

2. You file your taxes and you actually have a tax liability. If you don 't owe any income taxes (say your income taxes are wiped out by the child tax credit), you don't get the credit.

3. You do not owe AMT. Most people have no idea what their AMT tax is because if the 1040 tax bill is higher, they pay the 1040 tax bill. This credit is subject to AMT. So if the 1040 taxes were $2000 and the AMT taxes were $1500, there would only be $500 left for the credit. Which can be bummer if you bought a car eligible for a $2000 credit and were expecting to get it all back.

You could in theory, do a dry run of your taxes based on estimates to see if the credit would work for you. That should tell you if you *have* a tax liability or not, but since Congress hasn't enacted the AMT "patch" yet, you may find that the unpatched AMT kicks in and the credit would be worth less (or nothing to you).

For example.

Single person makes $50,000. Standard and personal exemption, brings the taxable income down to $41250. That's about $6750 in taxes. With no other credits, there appears to be plenty of money left for the hybird. But then let's go to the rough draft of the 6251 form. The tax bill under the unpatched AMT would $4225, leaving just $2525 of wiggle room for the credit.

Answer 2

American customers have not got an oath of fealty to oil companies. we are certainly not directly in cost for a fashion suitable they do. If a sparkling technologies places a dent of their industry, that's only too undesirable. do not punish human beings for procuring hybrids. Taxes at the instant are not meant to be punishments as nicely. Hybrids at the instant are not at risk of break down the financial kit, that's ridiculous. Environmentalists are certainly not the foremost substantial proponents of hybrids as nicely, it incredibly is inventors. that they had advise them, and that's advantageous. on the suitable of the day, a capitalist society works suitable with opportunities. Forcing actual anybody to prepare antiquated gasoline-only automobiles, that have damaging gasoline overall performance interior the U. S., is a few thing yet democratic or capitalist.

Answer 3

Tax breaks for hybrids depend on the model, and phase out when a certain number of that model have been sold.

The tax break amount is a credit, which means it is subtracted from your tax if you have that much tax liability - it can only reduce your tax to zero, so if you don't owe that much, you only get the amount off that equals your tax liability.

See also http://www.irs.gov/newsroom/article/0,,id=172162,00.html