Cash In on Tax Credits for Hybrid Cars
The right new car will save you money on gasoline and taxes.

If you’ve been considering buying a hybrid vehicle, a tax credit may help lure you into the showroom. The actual credit varies by vehicle, and the most-popular hybrids—made by Lexus, Honda and Toyota—have already exhausted their available credits.
But if you purchase a Ford Fusion or Mercury Milan hybrid by December 31, you will be eligible for a tax credit of $850. (A tax credit, which reduces your tax bill dollar for dollar, is more valuable than a tax deduction, which merely reduces the amount of your income that is taxed.) If you purchase one of these models between April 1 and September 30, 2009, you’ll qualify for a $1,700 tax credit, and if you bought one of these hybrids during the first quarter of 2009, you can claim the full tax credit, of $3,400, on your 2009 tax return.
The credit is phased out once a manufacturer sells 60,000 hybrid vehicles. Lexus, Toyota and Honda all hit this mark in previous years, so you won’t get a tax credit if you buy one of their hybrids this year. Ford and Mercury hit the 60,000 mark in the last quarter of 2008. That means you will be allowed to claim only 50% of the credit for purchases of their hybrid vehicles in April through September 2009 and 25% of the credit for purchases made in the last quarter of the year.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Full tax credits are still in effect for 2010 hybrid versions of the Nissan Altima ($2,340) and Chevrolet Malibu ($1,550). The full $2,200 credit is available for each of the following 2010 hybrid models: Cadillac Escalade; Chevrolet Silverado and Tahoe; and GMC Sierra and Yukon.
There is no income eligibility limit for claiming the credit, and you can use it even if you are subject to the alternative minimum tax, which normally disallows many credits and deductions permitted under the regular tax rules.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Stock Market Today: Have We Seen the Bottom for Stocks?
Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
By David Dittman
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?
Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
By Kelley R. Taylor
-
Ten Cheapest Places To Live in Florida
Property Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
By Kate Schubel
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax Refunds
Tax Refunds As many as one million taxpayers could be missing out on a significant tax refund.
By Gabriella Cruz-Martínez
-
Which Generation Pays the Most Tax in the US?
Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
By Kelley R. Taylor
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and Discounts
Tax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
By Gabriella Cruz-Martínez
-
Tax Time: Does Your Kid Influencer Owe Taxes?
State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
By Gabriella Cruz-Martínez
-
Trump Plans to Terminate IRS Direct File program
Tax Filing The IRS Direct File program was piloted last year in 12 states and has since expanded to 25. But will it last under the Trump administration?
By Gabriella Cruz-Martínez
-
How Caregivers for Adults Can Save on Taxes in 2025
Tax Breaks Caring for your parent or spouse can be stressful, but the IRS offers tax breaks for qualifying taxpayers. Here they are.
By Kate Schubel
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social Security
Treasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
By Gabriella Cruz-Martínez