Toyota Hybrid Tax Credit Expires

New hybrid owners who recently purchased a Toyota or Lexus hybrid, and expect to get some relief on their income taxes, could be disappointed. The Internal Revenue Service has discontinued the federal tax credits for all such vehicles—including the flagship Prius—as of Oct. 1, 2007. Toyota Motor Corporation has hit a legal cap in the number of vehicles sold that can offer the credit. Only hybrids purchased before the Oct. 1 deadline are now eligible for the incentive.

According to IRS rules, the tax credit for new hybrid vehicles begins to phase out when an automaker sells 60,000 hybrids. Toyota hit the magic number last summer, which initiated the beginning of the phase out process. Honda recently reached the mark of 60,000 hybrids sold, and will now start their phase-out into next year. GM, Ford, and Nissan are not expected to reach cap before 2009 (when the incentive laws will be reconsidered or entirely discontinued).

Customers who bought any one of the five Toyota and Lexus hybrid models between April 1 and September 30 of this year are eligible for tax credits ranging anywhere from $450 for the Lexus LS 600h L to $787.50 for the Toyota Prius. The reduction of tax credits for Toyota hybrids, which began phasing out in 2006, have apparently had little effect on sales of the carmaker’s hybrids—which continue to dominate the hybrid market.


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  • sean

    I believe that Americans who want to be a bit green will be disappointed but if you think that in Australia we have not got a cent from the government as any form of rebate, you’ll feel better. John Howard is trully a global warming sceptic.

  • Penelope Prius

    In my opinion, the federal U.S government should still be giving out the full incentive to hybrid buyers to promote more wide spread hybrid usage.

    Prius owner in Texas

  • Neil D.

    The tax credit has been very useful to keep hybrid sales going, especially when the price of gas has been see-sawing in the $2-$3 range over the past couple of years. Most of the general public sees buying a hybrid as a money-saving proposition only, with environmental considerations taking 2nd place.

    Considering that gas is now a solid $3+ per gallon in the states and probably will only go up, the credit is probably not needed to prove the financial equation and help hybrid car sales keep pace.

  • langjie

    the tax credit should have been an operation credit that is spread out through maybe 5 years instead of a 1 time shot