| Prior to January 1, 2006, you were restricted to | | | | Energy Act, the government has made it foolish NOT |
| claiming a $2,000 tax deduction if you purchased a | | | | to purchase a hybrid. It did this by changing the tax |
| hybrid car. Now you can claim a tax credit, which is | | | | deduction into a tax credit. |
| much more valuable. | | | | The IRS is now allowed to set tax credit amounts |
| Conspiracy theorists often offer rather exotic | | | | applicable to hybrid purchases so long as the amount |
| arguments about how the government tries to control | | | | does not exceed $3,400. In regard to the 2007 Lexus |
| us. When it comes to taxes, they are absolutely | | | | GS 450 hybrid, it has just done so. If you purchase a |
| correct. Both federal and state governments try to | | | | new 2007 Lexus GS 450 hybrid after January 1, 2006, |
| influence our behavior by levying or reducing taxes. If | | | | you can claim a tax credit of $1,550. |
| the government wants to promote something, it gives | | | | You may think $1,550 is nice, but not overly impressive. |
| you tax breaks if you do it. If the government wants to | | | | How wrong you are! Unlike a tax deduction, a tax |
| discourage something, it loads the product or service | | | | credit is applied directly to the amount of taxes you |
| up with taxes. | | | | owe. Assume you determine you owe $6,500 when |
| If you have filled up your car at the pump in the last | | | | you prepare your 2006 taxes next year. Instead of |
| week, you know gas prices are out of control. Despite | | | | writing a check to the IRS, you will first deduct your |
| our wailing, they politicians really cannot do that much | | | | tax credit from the amount you owe giving you a bill of |
| since we are dependent on foreign oil sources. They | | | | 4,950. This dollar for dollar reduction in your tax liability |
| have, however, taken one long-term approach by | | | | is what makes tax credits so great. |
| promoting the purchase of hybrid vehicles. | | | | As with all hybrid tax credits, they scale down as |
| Prior to 2006, the government provided all taxpayers | | | | more cars are sold. Make sure to ask your accountant |
| that purchased a new hybrid with a healthy $2,000 tax | | | | or dealer the current tax credit amount when you |
| deduction. With the recent passage of the Bush | | | | make your purchase. |