The Energy Policy Act of 2005 replaced the existing alternative fuel tax deduction with a tax credit but it’s been quite some time since we’ve taken a look at this incentive. After the excitement of the “Cash for Clunkers” program, some people may have taken advantage of this incentive by putting a hybrid vehicle into service.

How the credit works: Taxpayers can claim the full tax credit until the manufacturer has sold over 60,000 eligible vehicles. Once it hits that figure, the tax credit is slowly phased out. For the current quarter, in which the 60,000th vehicle is sold, and the next quarter, taxpayers can claim the full tax credit. For the two subsequent quarters, taxpayers can claim 50% of the full tax credit. Then for two quarters they can claim 25% of the full tax credit. Then the tax credit expires.

Here’s how each of the manufacturers are doing:
– Chrysler – full tax credit available
– Ford – 25% credit until March 31st, 2010
– GM – full tax credit available
– Honda – tax credit expired December 2008
– Mazda – full tax credit available
– Mercedes – full tax credit available
– Nissan – full tax credit available
– Toyota – tax credit expired August 2007

For a full list of eligible hybrid vehicles and the tax credits for buying them, which is a function of the vehicle’s price, I recommend Fueleconomy.gov for specifics.

Jim writes about personal finance at Bargaineering.com.

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