Hybrid Vehicles And Tax Benefits

Hybrid Vehicles And Tax Benefits



Hybrid Vehicles and Tax Benefits
You have to​ love car dealers .​
With the​ passage of​ the​ Energy Policy Act of​ 2018,​ car dealers are screaming about the​ tax benefits of​ buying these vehicles .​
Here’s the​ scoop .​
Deductions and Credits
The Energy Policy Act of​ 2018 made a​ major modification to​ the​ tax benefits of​ owning a​ hybrid vehicle in​ an​ effort to​ entice businesses and individuals to​ pursue cleaner fuel uses .​
The primary switch was to​ move the​ tax benefits from deductions to​ credits .​
Specifically,​ the​ Act creates a​ credit that can be claimed by taxpayers who purchase one of​ these super fuel efficient vehicles .​
Taxpayers can now claim a​ credit of​ as​ much as​ $3,​400 per vehicle .​
This is​ a​ HUGE tax break because credits are subtracted from the​ amount of​ tax you​ owe,​ not your gross income .​
If you​ can claim a​ credit of​ $3,​400 and owe $5,​000 after figuring your tax,​ you​ end up paying $1,​600 .​
Anyway you​ look at​ it,​ this is​ a​ very powerful tax savings benefit .​

There are a​ few problems with the​ new credit for hybrid vehicles .​
First,​ the​ credits only apply to​ vehicle purchases beginning January 1,​ 2018 .​
If you​ purchased in​ 2018,​ you​ get to​ claim a​ pitiful little deduction covered later on​ this page .​
Deductions have much less impact on​ your taxes since they are applied to​ gross earnings .​
Second,​ the​ credit amount is​ not set regardless of​ what dealers or​ the​ media is​ saying .​
As of​ February 10,​ 2018,​ the​ IRS hasn’t issued any guidance on​ the​ credit amount .​
When it​ does,​ the​ IRS will set a​ particular credit amount for each vehicle and model .​
In coming up with a​ figure,​ the​ IRS analyze how clean the​ vehicle is​ from an​ emissions point of​ view,​ the​ size and other things that a​ mechanic would understand .​
How an​ IRS agent understands these issues is​ beyond me,​ but such is​ life .​
Regardless,​ the​ IRS will be issuing the​ credit amounts for particular vehicles as​ we move through 2018 .​
If you​ purchased your hybrid in​ 2018,​ you​ do not get to​ claim a​ credit against the​ amount you​ owe Uncle Sam .​
Instead,​ you​ claim a​ deduction in​ the​ amount of​ $2,​000 from your adjusted gross earnings .​
While this doesn’t have nearly the​ impact of​ a​ credit,​ at​ least you​ get something.




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