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Fed, State, and Corporate hybrid purchase incentives. Yesterday, today, and tomorrow.

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Old 08-29-2006, 05:07 PM
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Fed, State, and Corporate hybrid purchase incentives. Yesterday, today, and tomorrow.

Wayne Gerdes - August 29, 2006 - CleanMPG.com

Federal, State, and Corporate Hybrid automobile purchase Tax/Cash incentives - Yesterday, today, and possibly tomorrow …

Section I - Past Hybrid Automobile Federal Tax Incentives available up through Dec 31, 2005.

For the 2005 tax year, hybrid vehicles when purchased new were allocated a $2,000 tax deduction to help offset some of the hybrid automobile expense premium. The following hybrids were included in this Pre-2006 Tax Deduction program.

YearMakeModel
2005-2006FordEscape Hybrid FWD
2005-2006FordEscape Hybrid AWD
2005HondaAccord Hybrid
2003-2005HondaCivic Hybrid (all)
2000-2005HondaInsight 5-speed
2000-2005HondaInsight CVT
2006LexusRX 400h
2006MercuryMariner Hybrid
2006ToyotaHighlander Hybrid
2001-2006ToyotaPrius

For your vehicle to have qualified, the following requirements must also have been met:
  • You must purchase the vehicle new and for your own use, not for resale.
  • You must drive it mostly in the United States.
  • The vehicle must meet all federal and state emissions requirements.
  • Government agencies, tax exempt organizations, and foreign entities are not eligible.
What if you purchased the qualifying hybrid before 2005?

If you bought your vehicle in a previous tax year, you must fill out an amended tax return Form 1040X for that year.

What's the difference between a deduction and a credit?

A tax deduction reduces the amount of income for which you are taxed. For example, if your taxable income were $50,000, a $2,000 deduction would reduce it to $48,000. So, you would pay taxes on an income of $48,000 instead of $50,000. This means your actual savings would be a fraction of the $2,000 deduction. If you fall into the 28% tax bracket, you save just $560 from the $2,000 hybrid tax deduction.

A tax credit reduces the total amount of income tax you owe. So, if you owed $10,000 in federal income tax, a $2,000 credit would reduce the amount you owed to $8,000. With a credit, your actual savings would be $2,000.

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Section II - Current Hybrid automobile Federal Tax incentives available for hybrids purchased after Dec. 31, 2005.

For the 2006 tax year, hybrid vehicles when purchased new were allocated upwards of a $3,150 tax credit to help offset some of the hybrid automobile expense premium. The following hybrids were included in this Post Dec. 31, 2005 Tax Deduction program.

The new qualified hybrid motor vehicle credit begins to phase out in the second calendar quarter after the calendar quarter in which at least 60,000 of the manufacturer’s qualifying passenger automobiles and light trucks have been sold. Notice 2006-9 requires manufacturers who have received acknowledgement of certification to submit a report to the IRS of the number of qualified vehicles sold to a retail dealer during the calendar quarter. For this purpose, qualified vehicles are any passenger automobile or light truck that is a new, advanced lean burn technology motor vehicle or a qualified hybrid motor vehicle. After review of the quarterly reports, the IRS will issue an acknowledgement letter to the vehicle manufacturer stating whether purchasers may continue to rely on the certification.

In advanced layman’s terms, this is how the Tax credit is calculated:

Auto manufacturers will calculate the tax credit for qualifying hybrid (and diesel) models and submit certifications on qualifying models, including the credit amount, to the IRS. The American Council for an Energy-Efficient Economy (ACEEE) has made a preliminary estimate of the credit amount for hybrid vehicles now on the market.

For cars and light trucks (SUV's, minivans, and pickup trucks up to 8,500 pounds) the tax credit is the Sum of the “fuel economy credit” and the “conservation credit,” both of which depend on the vehicle’s fuel economy compared to the baseline “2002 model year city fuel economy” of a vehicle in the same weight class.

The fuel economy credit depends on the improvement of the fuel economy over the baseline. The credit is as follows, based on the vehicle fuel economy as a percentage of the baseline fuel economy:

Percent of baseline CreditCredit Amount
125% - 150%$400
150% - 175%$800
175% - 200%$1,200
200% - 225%$1,600
225% - 250%$2,000
250% of more$2,400

The conservation credit depends on the estimated lifetime fuel savings, expressed in gallons of gasoline. The credit is:

Fuel Savings (gallons)Credit Amount
1,200 to 1,800$250
1,800 to 2,400$500
2,400 to 3,000$750
3,000 or more$1,000

Fuel savings are calculated as (120,000 miles divided by baseline mpg) minus (120,000 miles divided by vehicle mpg).

2006-2007 FWD version of the Ford Escape Hybrid (2WD) and the AWD versions of the 2006-2007 Ford Escape and Mercury Mariner Hybrid (4WD)

$2,600 Incentive currently ---- $1,950 Incentive currently

YearMakeModelDate for Full Credit - AmountDate for 50% Credit - AmountDate for 25% Credit - Amount
2006-2007FordEscape Hybrid FWDJan. 1, 2006 - $2,600TBD - $1,300TBD - $650
2006-2007FordEscape Hybrid AWDJan. 1, 2006 - $1,950TBD - $975TBD - $488
2006-2007MercuryMariner Hybrid AWDJan. 1, 2006 - $1,950TBD - $975TBD - $488

2006-2007 GM Sierra and Chevrolet Silverado Hybrid(s) and the Saturn VUE Greenline

$250 - $650 Incentive currently ---- $650 Incentive currently

YearMakeModelDate for Full Credit - AmountDate for 50% Credit - AmountDate for 25% Credit - Amount
2006-2007GMSierra Hybrid (4WD)Jan. 1, 2006 - $650TBD - $325TBD - $163
2006-2007GMSierra Hybrid (2WD)Jan. 1, 2006 - $250TBD - $125TBD - $63
2006-2007ChevroletSilverado Hybrid (4WD) Jan. 1, 2006 - $650TBD - $325TBD - $163
2006-2007ChevroletSilverado Hybrid (2WD)Jan. 1, 2006 - $250TBD - $125TBD - $63
2007SaturnVue (Green Line)Jan. 1, 2006 - $650TBD - $325TBD - $163

2005 Honda Accord Hybrid and the 2005 - 2006 Honda Accord Hybrid w/ updated Control Calibrations

$650 - $1,350 Incentive currently

2005 Honda Civic Hybrid SULEV based MT/CVT and 2006 Honda Civic Hybrid

$1,700 Incentive currently ---- $2,100 Incentive currently

2005-2006 Honda Insight (CVT only)

$1,450 Incentive currently

YearMakeModelDate for Full Credit - AmountDate for 50% Credit - AmountDate for 25% Credit - Amount
2005HondaAccord HybridJan. 1, 2006 - $650TBD - $325TBD - $163
2006HondaAccord Hybrid (w/out Control calibration)Jan. 1, 2006 - $650TBD - $325TBD - $163
2006HondaAccord Hybrid (w/ updated control calibration)Jan. 1, 2006 - $1,350TBD - $675TBD - $338
2005HondaCivic Hybrid (SULEV) MT&CVTJan. 1, 2006 - $1,700TBD - $850TBD - $425
2006HondaCivic Hybrid CVTJan. 1, 2006 - $2,100TBD - $1050TBD - $525
2005-2006HondaInsight CVT Jan. 1, 2006 - $1,450TBD - $725TBD - $363

2007 Toyota Camry Hybrid

$2,600 Incentive through Sept 30, 2006

2006 Toyota Highlander Hybrid and the 2005-2006 Toyota Prius II

$3,150 Incentive through Sept 30, 2006 ---- $2,600 Incentive through Sept 30, 2006

YearMakeModelDate for Full Credit - AmountDate for 50% Credit - AmountDate for 25% Credit - Amount
2007ToyotaCamry HybridJan. 1, 2006 - Sept. 30, 2006 - $2,600Oct. 1 2006 - March 31, 2007 - $1,300April 1 - September 30, 2007 - $650
2006ToyotaHighlander Hybrid (2WD & 4WD)Jan. 1, 2006 - Sept. 30, 2006 - $2,600Oct. 1 2006 - March 31, 2007 - $1,300April 1 - September 30, 2007 - $650
2005-2006ToyotaPriusJan. 1, 2006 - Sept. 30, 2006 - $3,150Oct. 1 2006 - March 31, 2007 - $1,575April 1 - September 30, 2007 - $788

2006 - 2007 Lexus RX400h and the 2007 Lexus GS450h

$2,200 Incentive through Sept 30, 2006 ---- $1,550 Incentive through Sept 30, 2006

YearMakeModelDate for Full Credit - AmountDate for 50% Credit - AmountDate for 25% Credit - Amount
2006LexusRX400h (2WD & 4WD)Jan. 1, 2006 - Sept. 30, 2006 - $2,200Oct. 1 2006 - March 31, 2007 - $1,100April 1 - September 30, 2007 - $550
2007LexusGS 450hJan. 1, 2006 - Sept. 30, 2006 - $1,550Oct. 1 2006 - March 31, 2007 - $775April 1 - September 30, 2007 - $388

As of July 12, 2006, the Service has acknowledged the following quarterly reports:

ManufacturerQuarter EndedNumber of Vehicles Sold to DealersNews Release #
Ford Motor CompanyMarch 31, 20066,192IR-2006-90
Toyota Motor CompanyMarch 31, 200641,779IR-2006-91

With Toyota Motor Company’s total Hybrid sales surpassing the 60,000 total sales threshold in the second quarter of this year, the Federal Hybrid tax incentives will be reduced by 50% after September 30, 2006 as shown in the tables above.

Future as yet to be released Hybrids including the Nissan Altima, Chevrolet Malibu, GMC Yukon and Chevrolet Tahoe, Ford Fusion, and possibly a host of Toyota and Honda hybrid(s) yet to be disclosed will have the appropriate tax incentives applied after their EPA city/highway numbers have been shown and the calculation for their incentives completed if the current tax laws holds true through Dec 31, 2010.

“Lean-burn” diesel vehicles also could qualify, but currently-available diesel vehicles do not meet the emissions standard. There is a similar credit for alternative-fuel vehicles and for fuel-cell vehicles, but these are not widely available.

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Section III - Current Hybrid automobile State Tax incentives.

Colorado: Prior to July 1, 2011, an income tax credit is available from the Colorado Department of Revenue for the incremental cost of purchasing an AFV, conversion of a vehicle to operate using an alternative fuel and HEV’s.

YearMakeModelHybrid Tax Credit
2005FordEscape (FWD)$2,758
2005FordEscape (AWD)$2,797
2006FordEscape (FWD)$2,826
2006FordEscape (FWD)$2,856
2007FordEscape (FWD)$1,942
2007FordEscape (FWD)$1,972
    
2006MercuryMariner$3,158
2007MercuryMariner$2,265
    
2005HondaAccord Hybrid$2,936
2006HondaAccord Hybrid$3,209
    
2003HondaCivic Hybrid (Auto)$2,411
2003HondaCivic Hybrid (Manual)$2,261
2004HondaCivic Hybrid (Auto)$2,580
2004HondaCivic Hybrid (Manual)$2,430
2005HondaCivic Hybrid (Auto)$2,306
2005HondaCivic Hybrid (Manual)$2,156
2006HondaCivic Hybrid$2,531
   
2002HondaInsight$3,375
2003HondaInsight (Auto)$3,120
2003HondaInsight (Manual)$2,603
2004HondaInsight (Auto)$4,310
2004HondaInsight (Manual)$3,803
2005HondaInsight (Auto)$4,713
2005HondaInsight (Manual)$4,181
2006HondaInsight (Auto)$4,437
2006HondaInsight (Manual)$3,765
    
2006LexusRX 400h (Purchased prior to 11/1/05)$3,736
2006LexusRX 400h (Purchased on or after 11/1/05)$3,443
    
2006ToyotaHighlander (Base - Purchased prior to 11/1/05)$3,872
2006ToyotaHighlander (Limited - Purchased prior to 11/1/05)$3,825
2006ToyotaHighlander (Base - Purchased on or after 11/1/05)$3,659
2006ToyotaHighlander (Limited - Purchased on or after 11/1/05)$3,587
    
2001ToyotaPrius$3,546
2002ToyotaPrius$3,929
2003ToyotaPrius$3,070
2004ToyotaPrius$2,678
2005ToyotaPrius$3,434
2006ToyotaPrius$3,285

Connecticut: Hybrid Sales Tax Exemption: Prior to July 1, 2008, Hybrids getting at least 40 mpg are exempt from the state's 6% sales tax.

Louisiana: State Tax Credit: The Louisiana Department of Natural Resources offers a state income tax credit worth 20% of the cost of converting a vehicle to operate on an alternative fuel, and 20% of the incremental cost of purchasing an Original Equipment Manufacturer (OEM) alternative fuel vehicle (AFV). For the purchase of an OEM AFV, the tax credit cannot exceed the lesser of 2% of the total cost of the vehicle or $1,500. Only those vehicles registered in Louisiana can receive the tax credit.

Maine: Maine law pursuant to MRSA 36, sections 1752 and 1760-79 allows a partial sales tax credit of approximately $500 for hybrid cars that do not have a comparable vehicle model, such as the Toyota Prius and Honda Insight. It allows a credit of approximately $300 for cars that have a comparable gasoline-powered model, such as the hybrid Honda Civic.

New Mexico: From July 1, 2004 through June 30, 2009, HEVs with an EPA fuel economy rating of at least 27.5 miles per gallon are eligible for a one-time exemption from the motor vehicle excise tax at the time of the issuance of the original certificate of title for the vehicle.

New York: Purchasers of qualified HEVs are eligible for a tax credit of up to $3,000, depending on the vehicle's fuel economy. Current production models such as the Toyota Prius and Honda Insight qualify. The current law is set to expire December 31, 2006.

Oregon:

(1) Business Tax Credit: A Business Energy Tax Credit is available for the purchase of hybrid electric vehicles (HEVs) and dual-fuel vehicles, the cost of converting vehicles to operate on an alternative fuel, and the cost of constructing alternative fuel refueling stations. The tax credit is 35% of the incremental cost of the system or equipment and is taken over five years.

(2) Residential Tax Credit: A Residential Tax Credit of up to $1,500 is available for the purchase of a HEV or dual-fuel vehicle. A credit is also available for the purchase of an OEM alternative fuel vehicle, and the cost of converting vehicles to operate on an alternative fuel.

Pennsylvania:

(1) Hybrid Tax Rebate: The PA Department of Environmental Protection now offers an opportunity to Commonwealth residents to apply for a rebate to assist with the incremental cost for the purchase of a new hybrid, bi-fuel, dual-fuel or dedicated alternative fuel vehicle. The rebate amount for calendar year 2006 is $500. The rebate will be offered throughout the calendar year as long as funds are available. Rebates will be offered on a "first come, first served" basis. Rebate applications shall be submitted no later than six months after the purchase. As of 07/19/2006 - This program had been reinstated after the Rendell administration has earmarked $3 million in the state budget for the hybrid vehicle rebate program. According to a representative of the Pennsylvania Environmental Protection Agency, anyone who bought a hybrid vehicle during the suspension period can still get a $500 rebate. The state has also made an eligibility distinction between hybrids that use the technology primarily for fuel economy and what they call "mild" or "muscle" hybrids that use the technology for a performance boost.

(2) Alternative Fuels Incentive Grant Program: The AFIG Program was established in 1992 by the Pennsylvania Energy Office to reduce Pennsylvania's dependence on imported oil and improve air quality through the use of alternative fuels. Eligible applicants are essentially any entity incorporated or registered in Pennsylvania, and Pennsylvania residents. After July 1, 2001, qualified projects will receive funding for 20% of eligible project costs. Purchasing hybrid-electric vehicles is eligible for grant programs.

South Carolina: Statewide Hybrid Tax Credit: Consumers buying hybrid vehicles a state tax credit equal to 20% of the federal tax credit scheduled to begin in tax year 2006.

Utah: Limited State Tax Credit: The state provides an income tax credit for 50% of the incremental cost ($3,000 maximum) of a clean-fuel vehicle built by an OEM and/or an income tax credit for 50% of the cost ($2,500 maximum) of the after-market conversion of vehicles purchased after January 1, 2001 and registered in Utah. If not previously used, the tax credit on used vehicles may be claimed. Tax credits are available for businesses and individuals and may be carried forward up to five years. Tax credits are not available for electric hybrids, except the Honda Civic hybrid.

Washington: Tax Incentives for Clean Alternative Fuel Vehicles: From 1/1/09-1/1/11, retail sales tax of 6.5 % levied by Revised Code of Washington (RCW) 82.08.020 does not apply to sales of new passenger cars, light duty trucks, and medium duty passenger vehicles, which utilize hybrid technology and have a United States environmental protection agency estimated highway gasoline mileage rating of at least forty miles per gallon nor does the state use tax of 82.12 RCW.

Washington DC: “Hybrid/Hummer” Tax: Within the DMV Reform Amendment Act Of 2004 went into effect on April 15, 2005. One provision exempts owners of hybrid and other alternative fuel vehicles from excise tax on their vehicle, and will reduce the vehicle registration charge, while excise tax rates for heavy passenger vehicles (over 5,000 pounds) will increase to 8% (from 7%).

West Virginia: Alternative Motor Vehicles Tax Credit: You can claim a credit for the purchase of a new motor vehicle that runs on an alternative fuel or for the conversion of a traditionally fueled motor vehicle to an alternatively fueled motor vehicle. Alternative fuel types include compressed natural gas, liquefied natural gas, liquefied petroleum, methanol, ethanol, coal-derived liquid fuels, electricity, solar energy and fuel mixtures containing at least 85 percent alcohol. The tax department includes hybrids in this tax credit. The rule asks for the taxpayer to calculate the cost difference between a conventional and the hybrid vehicle purchased. However, for the Toyota Prius and Honda Insight, no such conventional vehicle exists. A representative at the West Virginia Department of Environmental Protection suggests that taxpayers look to Colorado’s similar tax credit program that establishing an incremental price differential for all of the common hybrids for Colorado taxpayers to use in their calculations. When you fill out your tax form, print a copy of the Colorado tax info (found here: http://www.revenue.state.co.us/fyi/html/income09.html) and attach a note explaining your rationale. Since Colorado has established an incremental price difference of $4040 for the 2005 Prius, a West Virginia resident using the same strategy for a 2005 model could claim the full $3750 available West Virginia tax credit.

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Section IV - Corporate Hybrid automobile purchase incentives and conclusion.



CompanyIncentive Amount
Bank of America$3,000 to employees purchasing an HEV in Boston, Charlotte, and LA.
Google$5,000 towards the purchase of any HEV - $2,500 toward the lease of any HEV.
Hyperion Software$5,000 towards the purchase of any HEV up to $1,000,000
Timberland$3,000 to employees purchasing an HEV and reserved - up front parking spaces.
Topics Entertainment$2,000 to employees purchasing an HEV.

To possibly convince your own corporate board/CEO or small business owner to consider a corporate incentive for the purchase of a hybrid automobile, the following article might just be the one that pushes the suggestion over the top: Commuter Tax Benefits - Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM.

I posted only the Federal and State Tax and Corporate incentives as I found them. With all the bills in the various State houses, even newer Federal proposals, and corporations all over the country joining the Green incentive plans, this will definitely be an ongoing development. The deeper one looks, you will find a multitude of incentives in the way of HOV lane use in various states, free or limited price parking in various cities and counties, emissions testing exemptions, and even PHEV conversion Tax credits either available or pending in many different locations of the US.

For the Coloradoan’s, there is no reason not to purchase a Hybrid vehicle given the state and federal tax credits add up to an incredible sum. For those considering a Toyota/Lexus hybrid in the near future (I fall into this category), September 30th, 2006 is the drop dead date for the full Federal Tax Credit with it being cut in half after that date. Remember however that this credit is based off a vehicle that for all intents and purposes will be one year older then the 07 (Highlander, Prius II and RXh owners need to consider this fact) that will soon be available. On the backside of your sale (when you trade or sell your used hybrid vehicle), a 1 year newer vehicle may be worth more then the Federal Tax incentive so weigh your purchase dates and make/model of hybrid carefully. I would also suggest that you look into both the Federal Tax incentive and follow closely what your state is currently proposing or has already passed. There is no perfect document other then what comes from the federal government (and that can change on a monthly basis?) or from your state explaining the exact amounts and the exact details of any tax credit/deductions allowed. AMT will affect the Federal Tax Credit so make sure you consider that tax situation as it could turn around and bite you. I am not a tax specialist so use this Hybrid Tax/Cash Incentive - Article as a guide. When and if you are ready to pull the trigger on a new hybrid automobile, I would highly suggest that you discuss any tax credits or incentives with your CPA so as to make sure all the t’s are crossed and the i’s are dotted. In other words, do your research and afterwards, the reward of a new hybrid vehicle purchase will be an even more positive experience for any number of reasons … And not just because of the tax/cash incentives either

Good Luck

Wayne Gerdes
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Old 12-04-2006, 10:03 AM
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Re: Fed, State, and Corporate hybrid purchase incentives. Yesterday, today, and tomor

The CT sales tax exemption applies to purchased or leased cars, and both new and used cars.

http://www.ct.gov/drs/cwp/view.asp?Q=284656&A=1436
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Old 12-04-2006, 10:17 AM
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Re: Fed, State, and Corporate hybrid purchase incentives. Yesterday, today, and tomor

Hi Tim:

___Thanks for that important addition. For those in CT., this is an even better deal then I had originally thought!

___Good Luck

___Wayne
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