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Prius Tax Credit Set to Decline

By Joe Benton
ConsumerAffairs.com

August 22, 2006

• Tax Credits On Ford Hybrids Phasing Out • Small Car Market Faces Potentially Large Problems • Ford Plans Car That Parks Itself • Drivers Wanted: Mini Developing Electric Model • GM Invests In Electric Car Engine Plant • GM Increasingly Viewed As "Green" By Online Consumers • Honda Plans New Hybrid for Earth Day 2009 • Hybrid Technology a Presidential Campaign Issue --- • More ...

Toyota buyers in search of hybrid tax credits need to hurry along to the dealership before the federal incentives begin to disappear.

Toyota and its Lexus division have now sold 60,000 hybrids this year and that means consumers looking for 100 percent of the tax credit on a Toyota or Lexus hybrid must complete the purchase by the end of September.

After September 30, Toyota's credit drops to 50 percent.

The Energy Policy Act of 2005 established tax credits for hybrid purchases of up to $3,400. Then things get complicated.

To receive a full tax credit, a consumer must buy a new hybrid no later than the end of the calendar quarter that occurs after the calendar quarter in which the hybrid manufacturer sold its 60,000th hybrid.

Toyota hit the magic "60,000 hybrids sold" number at the end of May. That is good news for the automaker and bad news for consumers looking for the tax break.

With the present tax law, the tax credit at Toyota will now continue to decline to 25 percent of the full credit,then disappear altogether.

Here are the tax credits for hybrid purchases as they exist now according to the Internal Revenue Service:

• 2007 Toyota Camry Hybrid -- $2,600
• 2005 Toyota Prius -- $3,150
• 2006 Toyota Prius -- $3,150
• 2006 Toyota Highlander Hybrid -- $2,600
• 2007 Lexus GS 450h -- $1,550
• 2006 Lexus RX 400h -- $2,200
• 2006 Ford Escape Hybrid FWD -- $2,600
• 2006 Ford Escape Hybrid 4WD -- $1,950
• 2006 Mercury Mariner Hybrid 4WD -- $1,950
• 2005 Honda Insight CVT -- $1,450
• 2006 Honda Insight CVT -- $1,450
• 2005 Honda Civic Hybrid MT and CVT -- $1,700
• 2006 Honda Civic Hybrid CVT -- $2,100
• 2005 Honda Accord Hybrid AT with Navigation -- $650
• 2006 Honda Accord Hybrid AT -- $1,300
• 2006 Honda Accord Hybrid AT with Navigation -- $650

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