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January 23, 2006

Tax credits for hybrids

Hybrid cars are one way to achiever greater fuel efficiency, and 2006 brings a new financial incentive for U.S. taxpayers to consider these vehicles. N.C. State University's Mike Walden explains.

"There is a new federal tax credit, and of course a tax credit is much more valuable than a tax deduction because it reduces your tax bill dollar for dollar with a credit," says Walden, a professor and extension economist with the College of Agriculture and Life Sciences.

"These credits will range in value from a low of $250 per vehicle bought up to perhaps as high as $3,400. And again this is a direct reduction of your tax bill," he says.

"There are however two hitches to this: One is that taxpayers who are subject to something called the alternative minimum tax cannot use this. And more and more tax payers are being subject to this AMT. So that’s an issue that you have to discuss with your tax accountant.

"Also the credits will phase out once an automaker sells 60,000 hybrids," he adds. "So you need to check with the auto dealer that you are buying the hybrid from to make sure they haven’t exceeded that quota."

Posted by deeshore at January 23, 2006 08:00 AM