In addition to the obvious (gas savings), buying a fuel-efficient car can put more money back into your pocket. Congress has finally gotten its act together and is offering tax breaks for certain vehicles for 2006.
Beginning in January 2006, those who purchase eligible vehicles will receive a tax credit, as opposed to a tax deduction. The main distinction between a credit and a deduction is that the credit is subtracted from the tentative tax due to IRS, as opposed to a mere reduction in gross income.
The IRS has not yet released the actual dollar figures for the credits, but American Council for an Energy Efficient Economy has made estimates based on its understanding of three factors:
- Fuel economy and improved gas efficiency compared to a 2002 model;
- Estimated savings of at least 1,200 gallons of fuel over the vehicle’s lifetime; and
- Emission standards approval (this is why no diesels will qualify for the credit).
Vehicles which should qualify for the credit include Toyota Prius, Honda Civic GX (sold only in California), Ford Escape Hybrid, Chevrolet Silverado Hybrid and Honda Insight (automatic version only).
