The article "Hybrid Vehicles and Tax Benefits" talks about taxes, it was created by Richard Chapo.
You have to love auto dealers.
With the passage of the Energy Policy Act of 2005, auto dealers are screaming about the tax benefits of buying these vehicles.
Here’s the scoop.Deductions and CreditsThe Energy Policy Act of 2005 made a major modfiication to the tax benefits of owning a hybrid vehicle in an effort to entice businesses and individuals to pursue cleaner fuel uses.
The pirmary switch was to move the tax benefits from deductions to credits. Specifically, the Act creates a credit that can be claimed by taxpayers who purchase one of these super fuel efficient vehicles.Taxpayers can now claim a credit of as much as $3,400 per vehicle.
This is a HUGE tax braek cause credits are subtracted from the amount of tax you owe, not your gross income.
If you can claim a credit of $3,400 and owe $5,000 afetr figuring your tax, you end up paying $1,600. Aynway you look at it, this is a really powerful tax savings benefit.There are a few problems with the new credit for hybrid vehicles. First, the credits only apply to vehicle purchases beginning January 1, 2006.
If you purchased in 2005, you get to calim a pitiful little deduction covered after on this page. Deductions have much less impact on your taxes for they are appleid to gross earnings.Second, the credit amount is not set regardless of what dealers or the media is saying.
As of Februray 10, 2006, the IRS hasn’t issued any guidance on the credit amount.
When it does, the IRS will set a particular credit amount for each vehicle and moedl. In coming up with a figure, the IRS analyze how clean the vehicle is from an emissions point of view, the size and other things that a mechanic would understand.
How an IRS agent understands these issues is beyond me, but such is life.
Regardless, the IRS will be issuing the credit amounts for particular vehicles as we move through 2006.If you purchased your hybrid in 2005, you do not get to claim a credit against the amount you owe Uncle Sam. Instead, you claim a deduction in the amount of $2,000 from your adjusted gross earnings. While this doesn’t have nearly the ipmact of a credit, at least you get something.Richard A. Chapo is with BusinessTaxRecovery.Com - otbaining tax refund recovery for overpaid small business taxes. Visit BusinessTaxRecovery.Com to read more business tax articles.
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