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Investment Planning |
Hybrid Cars: Save the Environment AND Save on Your Taxes
Thinking about buying a new car? Purchasing a hybrid vehicle may earn you a tax credit. The amount of the credit depends upon the car’s fuel efficiency. The only bad news is for those in the alternative minimum tax (AMT) system: the credit is not allowable for the AMT, but it does reduce your regular tax.
Since the hybrid models qualifying for the credit may change each year, go to www.irs.gov to get a current list of qualifying cars.
If you tend to hold onto your cars for four or more years, buying may be financially better than leasing, especially since leasing a hybrid earns no tax credit. Get the best deal you can on the car, and then negotiate with the dealer for attractive financing. If you don’t have cash available for the vehicle, consider tapping your home equity. However, if you are in AMT, you will lose the tax-deductible benefit of home equity line-of-credit interest. Be sure to discuss the specifics with your tax advisor.
Tips Disclaimer
These tips contain information that may change over time as a result of new tax legislation. Although we make efforts to keep this information current, you should check with your tax advisor before taking action based upon any information contained in these tips.