Law of the West: Save Gas, Save Taxes

Buyers of specific vehicles in 2006 will receive tax credits, not deductions, that are large enough to almost cover the difference in price between a conventional model and a hybrid vehicle.

Published: 11-Jan-2006

This last month or so, the car dealers have been pushing some great deals. Some of those deals have been on what are called hybrid cars. These vehicles are called hybrids because they combine two forms of power generation; typically, electric and gas engines.

The idea of a hybrid is really nothing new; its application to our personal automobiles is. At some time, we have all experienced a means of transportation that was a hybrid. Most trains run on either electric or diesel motors, depending on the situation. The same is true for things like city buses, trolleys, and some industrial equipment.

From the high technology of a submarine to the lowly moped, hybrid vehicles have been around for some time.

When it comes to the family car as a hybrid, their fuel efficiency brought them to the forefront last year with $3 a gallon gasoline. Their selling point last year was their great fuel efficiency and the fact that they have considerably reduced emissions.

Previously, the Internal Revenue Service had allowed some rather nominal deductions for being the owner of these vehicles. Starting with the first of the year, the law changed a bit and now some of the buyers of these vehicles will be eligible for substantial tax credits. Buyers of specific vehicles in 2006 will receive tax credits, not deductions, that are large enough to almost cover the difference in price between a conventional model and a hybrid vehicle. What that translates to is that you may be able to purchase a new hybrid and not pay anymore than you would have paid for a conventional model, after tax savings are factored in, and get all those fuel savings directly into your pocket.

Now, there are some cautions in this good news. Even though the new law that created the tax credits covers diesels as well as hybrids, it appears that even those very high mileage diesel cars will not be eligible for the benefits because of their emissions. The law creates a bit of a formula for the computation of the tax credit. We know that the size of the vehicle; its performance as compared to a similar 2002 non-hybrid model; and, specific emission standards all go into the mix. But, exactly which vehicles will qualify is still a bit unsettled. Further, the IRS hasn’t said yet exactly what the tax credits will be for hybrid purchasers.

So, if you are in the market for a hybrid, do a little research and make sure you will be able to receive the tax credits. Your accountant or other tax professional should be able to guide you in making a decision on the economics.

There is an organization with a Web site that provides a great deal of information about energy efficiency in our lives. The American Council for an Energy-Efficient Economy is a nonprofit organization dedicated to advancing energy efficiency as a means of promoting both economic prosperity and environmental protection. You can view their Web site at www.aceee.org.

When you surf over to their site, there is not only a link that will give you more information about energy efficiency tax credits, but a link about energy efficiency in agriculture. You can even view various presentations that were made last November in Iowa at a conference dedicated to energy efficiency in agriculture and small rural businesses.

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