Did you know that you can save money on taxes if you buy a hybrid car? However, the total amount you save will depend completely upon the tax program that is in effect at the time of purchasing the hybrid car.
There are basic qualifying criteria for getting taxes reduced and the reduction can be as much as $2,000, if not more. This tax saving can be done whether you itemize your expenses or you take a standard deduction. In order to avail tax reduction, you must buy a brand new car, the car should be for your own use, it must be for your use in the U.S., and it must meet all federal and state emission requirements.
The Energy Policy Act of 2005 came into effect from January 1, 2006. It offers you tax credit instead of clean fuel tax deduction and it valid for all hybrid cars and vehicles. The difference between tax deduction and tax credit is very simple. In tax deduction the amount is subtracted from your income before the tax is calculated. However, in tax credit, the deduction happens from the actual tax amount that you owe for the year.
The tax credit has been formed taking gas saving into perspective and you will end up getting a tax credit ranging from approximately $1,600 to $3,000 depending on the type of hybrid you purchase.
If you have not availed this benefit, it is time you started thinking about it because the tax credit program ends officially by 2009, but it will end much earlier for many models as there is a 60,000 vehicle limit in place for each manufacturer.
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