2006 Tax Credit on a leased vehicle

Bob -- you didn't specify where you live, so it's hard to answer the question.

Where I live (Ontario, Canada), you have to wait until the first 12 months of the lease is up before you can apply for a rebate on the PST paid to date. Depending on your lease rate, getting the full rebate may take longer.

The energy bill that was recently passed in the US has pushed me in the direction of a hybrid, and I would also like to lease instead of buy.

Any additional information on how tax credits or other incentives are applied to leases vs. purchases would be appreciated.

Any additional information on how the 2006 US tax credit would apply to a lease would be extremely useful.

The Federal deduction is only for the purchase of a hybrid. Since a least is not a purchase in the year 2005 which is a one time deduction, think your SOL.

I'v seen nothing that implies leasing will apply.
http://www.consumeraffairs.com/news04/2005/irs_ford_hybrids.html

The question that I have reading this again is, who is the "taxpayer"?

a) The individual who will be using the car (a leasee)

or

b) the company/bank that owns the car and leases it to the driving individual (the leasor).

If you are the ORIGINAL owner - or lessor- of a 2006 qualified hybrid, you will be eligible for a two-part TAX CREDIT - (1) The Fuel Economy Credit ranges between $400-$2,400 based upon the fuel efficiency and type of vehicle and (2) The Conservation Credit ranges from $150-$1,000 for the first 60,000 vehicles sold. If you lease the vehicle, you are also eligible for this tax credit. (In prior years, the clean-fuel vehicle deduction was only for purchasers.) this is a NEW TAX CREDIT for 2006 - different from the clean-fuel vehicle income deduction.

You must be the first owner of the vehicle. It doesn't matter when it was manufactured. It does matter when you put it into service or take possession (after Jan 1).

If you purchase a new Prius prior to 1/1/06 - I doubt you could find a 2005 - you will get a $2000 deduction. If you wait until 2006 and purchase it before Toyota sells 60K units, you get a much higher tax credit. The deduction won't save you much, but the credit will as long as you don't get caught by AMT.

The credit is only for new vehicles purchased (not leased) after 1/1/06. See www.toyota.com/prius and click the Federal Tax Benefits link.

From what I understand the first 60,000 rule is based on the quarters of the year. 100% credit up until the quarter that the 60,000 vehicle is sold. After that the percentage decreases from quarter to quarter until 0% is reached for a credit. So even if your vehicle is the 60,001 vehicle sold if it is still the same quarter as the when the 60,000 vehicle was sold then you will get a 100% credit. The manufacture will report to the IRS which quarter the 60,000 vehicle was sold in.

Here is an article published about 6/7/06:

Toyota hybrid sales hit tax credit ceiling
BUYERS AFTER SEPT. 30 GET HALF OF BREAK
By Matt Nauman
Mercury News
Toyota has sold more than 60,000 hybrid cars and sport-utility vehicles so far this year, enough to reach a government threshold that reduces the federal tax credit on those vehicles.
The good news for motorists weary of high gas prices is that the tax code is written so the 100 percent tax credit isn't reduced to 50 percent until the quarter after the one in which the 60,000-unit sales mark is reached.
That gives buyers from now until Sept. 30 to purchase one of the five gasoline-electric hybrid models sold by Toyota and its upscale Lexus division and still qualify for the 100 percent credit. On Oct. 1, the credit will be reduced by half.
``The credit amount is based on the purchase date of the vehicle,'' said Jesse Weller, a spokesman with the Internal Revenue Service in Oakland.
The credit will stay at 50 percent for two quarters, fall to 25 percent in the subsequent two quarters, then expire. For Toyota hybrid buyers, the tax credit expiration date is Oct. 1, 2007.
But, as Toyota spokesman Sam Butto said, ``You never know what will happen in Washington.''
Ford and Honda, the other two hybrid manufacturers, aren't near the 60,000-unit threshold so far this year.
In addition to purchase date, the full credit amount also varies by vehicle. It's $2,100 for a 2006 Civic Hybrid, $2,600 for a two-wheel-drive Ford Escape hybrid and $3,150 for a 2006 Prius. The credits, which replaced a previous deduction, are intended to encourage people to buy cleaner-burning, higher-mileage hybrid vehicles.
That's also why California allows certain hybrids, including the Toyota Prius, Honda Civic Hybrid and some Honda Insight models, into high-occupancy-vehicle lanes with just the driver.
But California's program has a cutoff point, too.
The last HOV sticker issued to a hybrid owner will be No. 75,000. Department of Motor Vehicles spokesman Steve Haskins said that through Tuesday, the state has received 64,811 applications and issued 56,775 stickers. It has rejected 606 applications as not eligible.
The state's supply of carpool-lane stickers will probably run out by the end of summer.

Honestly why renting one if you can afford to get one right, any way it really sucks when leasing it there are so many paper works to be done and you have to pay more.
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