More Tax Incentives for Hybrids in 2006

The new credits against tax bills replace a deduction of up $2,000 from taxable income.

Published: 05-Jan-2006

New federal tax credits expected to be as high as $3,100 are to be available this year to encourage the sale of fuel-saving, hybrid gasoline-electric cars, as automakers prepare to show off some new models at the upcoming Los Angeles and Detroit auto shows.

But there are some wrinkles to the incentives, which replace earlier tax deductions on some hybrid models. The credits are not expected to be available to buyers subject to the alternative minimum tax. And the numbers of hybrid cars per manufacturer that can qualify for the tax credit are limited; the tax incentives begin phasing out when 60,000 hybrid units of any make are sold.

Toyota had expected to sell about 100,000 Priuses last year and another 20,000 of its Lexus and Toyota hybrid sport utility vehicles, and it has predicted that credits for the Prius, the most popular hybrid model, could run out as early as June.

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