Those in the market for a hybrid car may want to get to the dealership as soon as possible. The United State's Energy Policy Act stipulates that car shoppers who purchase an alternative fuel vehicle after December 31, 2010 are no longer eligible to receive tax savings. Review a list of currently eligible hybrid and alternative fuel cars to determine if this deadline applies to you.
Enacted in 2005, the Energy Policy Act was designed to spur car shoppers to purchase alternative fuel vehicles. This was accomplished by offering a tax credit of up to $3,400. However, it should be noted that not all 2010 and 2011 hybrid cars are currently eligible for a tax credit and your specific tax situation may have an impact.
The Energy Policy Act also states that the maximum tax credit is only available for the first 60,000 eligible vehicles sold by each manufacturer. Following this, tax credits are available at 50 percent for a small period of time, and then 25 percent before being discontinued altogether.
A number of automakers have already maxed out the number of vehicles available for tax credits of any kind. These include Honda, Toyota, Lexus, Ford and Mercury. As such, if you're in the market for a 2011 Toyota Prius or 2011 Ford Fusion Hybrid, then making the purchase after the end of the year has little consequence.
A full list of hybrid cars that are still eligible for tax credits is listed below. If you've had your eye on one of these models, then now may be the time to take a test drive.
Energy Policy Act tax credits are not limited to hybrid vehicles alone. Diesel and CNG vehicles are also eligible for tax credits. As such, now may also be the time to purchase a Volkswagen TDI or Mercedes-Benz BlueTec vehicle. Available tax credits for diesel and CNG vehicles are as follows.
It should be noted that the expiration of the Energy Policy Act does not affect new plug-in electric vehicles such as the 2011 Chevrolet Volt and 2011 Nissan Leaf. In 2008, the U.S. government passed an additional bill known as the Transportation and Domestic Fuel Security Provision. This bill essentially extends additional tax savings to electric vehicles.
For both the Nissan Leaf and Chevrolet Volt, these tax credits result in a savings of up to $7,500. While there is no expiration date on these savings, the bill does limit tax credits to the first 250,000 plug-in cars sold in America. Once this benchmark is reached, eligible savings will fall by 50 percent for the next two quarters. Similarly, savings will then fall to 25 percent before being eliminated altogether.
Regardless of purchase date for a hybrid car or alternative fuel vehicle, shoppers may still be eligible for state tax savings. However, the availability of such tax credits varies from state to state (and sometimes city to city). Check your state's tax rules and regulations to find out if any additional tax savings are available to you.