Why Is A Hybrid Car Tax Deduction Worthwhile?

by : Michael Williams



Being environmentally conscience can be an advantage when it comes to saving you some money on your taxes with the fairly new hybrid car tax deduction. This is a new provision, since 2004, under the Working Families Tax Relief Act that allows for a hybrid automobile tax reduction. It can only be used once, but if you have recently bought one you could qualify for the tax reduction.

The way it can be taken advantage of is for those owners who bought them from the year 2004 and 2005 only. There is a limit when it comes to the car tax reduction, and that is $2,000, unfortunately that will decrease in 2006, when the car tax reduction limit will only be $500.

There are some improvements that are trying to be made in the hybrid car tax deduction. For one thing in August 2005 a revised energy bill was put into place to help increase incentives in buying a hybrid car. This bill helped exceed some of the limitations of the original hybrid automobile tax reduction by creating full dollar tax credits, which are an even greater advantage.

Going back to the car tax reduction that is in place right now, how much is dependent on the tax bracket you fall into. You can claim up to $2,000 but what comes off depends on where you fall in the tax brackets. The higher percentage tax bracket the more you will receive from the reduction and vice versa.

If you bought a hybrid car within three years of 2004 you can also apply for the car tax deduction. Of course this requires going back and modifying the original claim within three years of the return date or within two years of when any taxes were paid.

One good thing about claiming a tax reduction is you don't have to itemize. You can basically do your taxes as you normally would. The only thing is you must use a 1040 form and classified as 'clean fuel'. Other than that claiming this type of deduction is relatively simple and in the end can save you a good amount of money. As simple as it is, claiming a tax rebate is well worth it.

Now that you know what exactly qualifies you for this type of deduction you can see the benefits far outweigh any effort on your part it may take. Being environmentally conscience can not only help us all in keeping our planet clean, but can also help you personally by saving you money. So why not buy a hybrid and save with the hybrid car tax deduction?