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The taxman's deadline is fast approaching for those who bought a new hybrid vehicle in 2007 and are relishing the fat tax credit the federal government offers on those vehicles.
Or, perhaps you're thinking ahead to next year's filing deadline and considering buying a hybrid in 2008 to lessen your tax burden.
Well, think again -- especially if you bought a Toyota or Lexus hybrid after Sept. 30 of last year. If you did, you can expect zilch in the way of a tax credit because the credits expire after a manufacturer sells more than 60,000 hybrids.
Given the popularity of the Prius, it's not surprising that Toyota-Lexus was the first to exceed the limit. Honda is not too far behind. The credit for the Civic hybrid has already shrunk to as little as $425, with Honda possibly breaching the 60,000-sales limit by summer.
If you're shopping domestic hybrids, the tax credit issue is rosier -- not surprising, since the legislation was written to give U.S. automakers a leg up on the Japanese, who pioneered hybrid vehicles.
A 2008 Ford Escape hybrid and its clone cousin Mercury Mariner hybrid still qualify for a credit. Two-wheel-drive versions qualify for a credit of $3,000 while four-wheel drive versions qualify for a $2,200 credit. The difference in tax credits is based on the government's calculation of overall fuel savings -- four-wheel-drive vehicles are often, but not always, less efficient, so they get a smaller credit.
Over at General Motors, the 2008 GMC Sierra and Chevrolet Silverado hybrid pickups qualify for credits of between $250 and $650. The credits are relatively low because their hybrid systems are engineered to only increase fuel mileage when the truck would normally be at idle.
The 2008 GMC Yukon and Chevrolet Tahoe SUVs carry credits of $2,200 each, the biggest tax credits for a GM vehicle. The 2008 Malibu hybrid comes with a $1,300 credit.
Because most U.S. manufacturers aren't even close to the 60,000 sales threshold -- Ford is a little over halfway there -- it's reasonable to expect these tax credits will hold through 2008 and into 2009.
Nissan, the other manufacturer offering a hybrid, is also far from exceeding the sales limit with its 2008 Altima hybrid, which carries a $2,350 credit.
So, the lesson here is to make sure that your new hybrid qualifies for a tax credit before buying -- assuming that the credit is a prime issue in your decision to go hybrid.
Also, check with your accountant or review your taxes to see if the application of a big tax credit would kick you into territory where the alternative minimum tax applies. If that happens, using your hybrid tax credit could ultimately raise your tax bill.
When it comes to cars and taxes, nothing is simple.
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