Tax Breaks for Hybrids

Hybrids not only save fuel; many are also eligible for federal tax credits up to $3,400 (the specific amount depends on the vehicle). Some state and local governments also provide incentives for hybrids.

The credits don't last forever, however; credit amounts start phasing out for given manufacturers once they have sold over 60,000 eligible hybrid vehicles. For example, the Toyota Prius proved to be so popular the 60,000 limit was exceeded a long time ago.

When new models are introduced the tax credit is in full force, again until 60,000 units of that vehicle have been sold. Most manufacturers have hybrids that qualify for tax breaks; check the IRS website for up to date information about which vehicles still qualify and the amount of credit you can receive.