Attention Car Shoppers: A Message from the IRS

June 7, 2006

The Energy Bill of 2005 passed last summer now has the IRS in the business of monitoring hybrid car sales due to the special provision that the tax credit available to consumers for purchasing certain types of automobiles (like hybrids) only applies to a limited amount of automobiles sold. Here is the message from the IRS; and hurry, this offer is only good while supplies (of tax credits) last:

WASHINGTON — The Internal Revenue Service announced that purchasers of Ford Motor Company qualified vehicles may continue to claim the Alternative Motor Vehicle Credit. The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold.

The tax credit for hybrid vehicles applies to vehicles purchased on or after January 1, 2006, and it may be as much as $3,400 for those who purchase the most fuel-efficient vehicles.

The Quarterly Report of Qualified Vehicles for the Alternative Motor Vehicle Credit for the quarter ending March 31, 2006, shows that Ford (which owns Mercury) sold 6,192 qualifying vehicles to retail dealers.

The make, model year and the corresponding allowable credit for qualified vehicles sold in the quarter are:

· Ford Escape 2WD Hybrid, 2006 — $2,600

· Ford Escape 4WD Hybrid, 2006 — $1,950

· Mercury Mariner 4WD Hybrid, 2006 — $1,950

Consumers seeking the credit may want to buy early because the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

More information on hybrid vehicles and other alternative motor vehicles can be found at: IRS.gov.

Note: Here is the same news release for Toyota and Lexus hybrids (link). For more on how last year’s energy bill was poor tax policy, check out this previous blog post detailing the “Tax Pork” in the bill.

For more information on tax compliance, check out our section on the topic.


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