You might be wondering what tax incentives you are entitled to as a hybrid car owner. Do these incentives really make the hybrid vehicle worth its price tag? In the long run, do hybrid cars become cheaper to own? What about using hybrid vehicles on HOV lanes?

Beginning January 2006, an according to the Energy Policy Act, the government began awarding major tax credits to consumers who buy hybrid cars.

Tax credits are usually much more valuable than a tax deduction. Tax credits reduce tax amount dollar-for-dollar. On the other hand, a tax deduction will only remove a percentage of the taxes you may owe. Hybrid owners can itemize purchases on federal income tax forms, which in turn lower the total tax amount owed to the federal government.

Fact: hybrid vehicles carry a higher price tag than that of conventional gas engine vehicles. The reason lies with their costly batteries and because the hybrid vehicle has not one, but two separate engine beneath the vehicles. Despite this, tax credits do much to offset the cost of owning a hybrid car.

Plug-In Hybrids

Car buyers who purchase new gas-electric cars were eligible for over ,000 in federal tax credits. However, these tax credits applied to the first 60,000 hybrid vehicles cars that could be sold by a single automobile manufacturer. You had to act early to benefit from these tax advantages. Business and private hybrid owners or lessees are eligible for income tax credits for gas electric hybrid vehicles that are placed in service starting January 1, 2006 and bought on or before December 31, 2010.

The amounts of tax credits for hybrid vehicles are based on fuel economy improvements when compares to conventional vehicles in the same class of car or truck. Therefore, hybrid car owners with the highest fuel efficiency receive the largest tax credits for their vehicles.

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