With tax season in full swing, the Internal Revenue Service (IRS) is offering help for drivers of hybrid vehicles in determining their eligibility for the Alternative Motor Vehicle Credit, which was enacted under the Energy Policy Act of 2005. The IRS has created a fact sheet explaining how taxpayers can receive up to a $3,150 credit if they purchased and drove one of forty-four eligible hybrids in 2006. The credit applies to hybrid vehicles powered by an internal combustion engine and rechargeable battery.

2006 IRS Alternative Motor Vehicle Credit

To claim the Alternative Motor Vehicle Credit, drivers of hybrid vehicles need to complete Form 8910.

In calculating their credit amount, drivers must look at several factors, including the make and model of their hybrid as well as when the vehicle was purchased (leased hybrids are not eligible). The credit accounts for the vehicle’s fuel economy, which is determined by comparing the hybrid’s city driving fuel efficiency to that of a 2002 gasoline-powered vehicle. Also taken into consideration is the potential lifetime fuel savings the hybrid will provide.

Another stipulation of the tax credit states that once an automaker has sold sixty thousand of a hybrid vehicle, the tax credit for that hybrid will begin to phase out. Currently, some Toyota and Lexus models are not eligible for the full credit because they have exceeded the sixty thousand marker. Specific credits for each hybrid vehicle are available online, and more information can be found at www.irs.gov/newsroom/article/0,,id=165649,00.html.

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