I am not a tax professional, and this should not be considered professional advice. If you have any doubts about your abilities to do this on your own, please speak with an accountant. Thanks.

Like with other specialty credits, the ways of claiming (and sometimes, the ability to claim) the hybrid tax credit can be confusing. I should have bought a Prius when the full credit was available, but I waited and now there isn’t one at all. That’s right. Toyota and Lexus hybrids no longer qualify, and Honda hybrids won’t qualify for much longer. So what do you do if you need a credit to justify the extra expense of a new hybrid? Check out the credit schedule and see which models still qualify, and please, seriously consider whether any new car is in your budget. There’s a great conversation going on right now over at TreeHuggingFamily on the new green consumerism, and how buying eco-friendly isn’t always best for the environment … or anything else. Good reading.

Now. Let’s say, I look at the schedule and decide to go with a Ford Escape hybrid. I might get a $3000 tax credit. How can you tell if you’ll get the credit, or how much it will be? CNN Money did a good job of summing it up, but basically, if you pay the Alternative Minimum Tax, you don’t qualify, and if your regular tax isn’t greater than the AMT by the amount of the available hybrid credit, you’ll only be able to take part of it. What does that mean for people who don’t owe any taxes? Well, you’re out of luck. You can’t buy a hybrid and then get $3000 from the government. Aww, shucks.

Using Form 8910, you can figure out how much of a credit you can get, and where to put it on your main tax form.

Does this mean you can reserve the portion you didn’t use for another year, or amend last year’s return and take it? According to IRS Form 8910 Instructions, the answer is No:

Line 18
If you cannot use part of the personal portion of the
credit because of the tax liability limit, the unused credit
is lost. The unused personal portion of the credit cannot
be carried back or forward to other tax years.

Last year’s buyers may have missed out, but it’s a warning to the wise. Before justifying the extra expense of a hybrid with the tax credit, sit down with a professional and see what you’ll be getting from the government. Doing right by the environment is a wonderful thing, but not if it means buying a car you can’t afford, having it repossessed and having to drive around in a 20 year old fume-spewing clunker until you fix your credit. ;)

Your choice doesn’t have to be all or nothing. You can find used hybrids for sale* through websites like PriusChat.com, www.ebay.com, CarsDirect, Autotrader, Cars.com, or pick up the end of a lease (or get rid of your too-expensive ride) through Swapalease.com or Leasetrader.com. Used cars are not available for the federal hybrid tax credit, but sometimes you’ll save more and still get a wonderful car that lessens your impact on the planet.

* As with any online purchase, DO YOUR DUE DILIGENCE! A link does not mean a seller is endorsed for used car sales through EcoFriendlyDriver.com.

Post from: EveryJoe

USA: Forms to use for hybrid tax credits