Hybrid Tax Credits Starting to Fade
By John O'Dell September 26, 2007
The federal tax credits that helped pump up hybrid car sales for Toyota and Honda are winding down.
The program, established in the federal Energy Policy Act of 2005, rewards success by disappearing in several stages after a carmaker sells 60,000 hybrids. Toyota’s Prius hit that mark last year, and Honda’s Civic hybrid crossed the threshold last month.
Buyers of the 2007 Civic hybrid can still receive a $2,100 credit on cars purchased through December 31... The credit is then halved, to $1,050, on cars purchased from January 1 through June 30 of 2008, and it drops again, to $525, for purchases in the last half of next year before disappearing completely on January 1, 2009.
Tax credits for Toyota’s hybrids expire at the end of September. Ford, General Motors, Mercury, Mazda and Nissan haven’t hit the threshold yet, so their hybrids still qualify for the full federal tax credit— which varies by model.
Mazda, which just launched its 2008 Tribute SUV hybrid, is selling it only in California, while Nissan is limiting sales of its Altima hybrid to California and the seven Northeastern states that have adopted California emissions rules: Connecticut, Maine, Massachusetts, New Jersey, New York, Rhode Island and Vermont.
Will loss of the federal credits hurt sales?
"The decline will have some negative impact on sales only if Honda does not increase incentives to make up the difference," says Jesse Toprak, Edmunds.com's senior industry analyst.
"When the tax credits for the Prius expired, Toyota first introduced generous incentives for it followed by a dramatic price reduction. Both strategies helped keep sales around record numbers. I suspect Honda may follow a similar strategy," he said.
Analysts at Global Insight say that tax credits typically have taken a back seat to fuel economy and image-building when consumers are deciding whether to go hybrid.
And many states and some local agencies offer incentives of their own.
Still, that federal credit helped erase the hybrid premium automakers charge for all the extra technology.
LEAVE A COMMENT
Click here to comment on this entry.Yes, it is disappointing that the tax credits are going. But, be sure to research the state incentives.
Colorado is just terrific in this regard. The tax credits are designed to cover the majority of the cost difference between the Hybrid and an ordinary car. The 2007 Prius received a tax credit of over $3k, for example.
http://www.revenue.state.co.us/fyi/html/income09.html
While 2008 numbers haven't been calculated yet, I called the state dept of revenue and they indicated that the program will be in effect for 2008.
Strange, I thought it was on an annual basis. I didn't realize they will simply expire.
Still, that gave hybrids a boost while under early development. The technology must now stand on its own.
I guess everyone keeps missing the fact that for married couples at least, the federal credits are illusory anyway, because of the pernicious reach of the Alternative Minimum Tax. Originally designed to force the very rich to pay at least some income tax (when they were able to get out of paying the "regular" tax through various tax shelters), the ALT now reaches down into the ranks of the middle class, particularly if both spouses work outside the home. This is because the ALT hasn't been indexed for inflation.
Yeah, the ALT definately causes problems. I was a VITA rep last year and ALT took a beating on many of my clients.
There is still the full credit if you buy a CNG only powered vehicle.
http://www.eere.energy.gov/afdc/progs/view_ind_fed.php/afdc/348/0
ADD A COMMENT