What are Hybrid Vehicles?
These are vehicles that have drive trains powered by both an internal combustion engine and a rechargeable battery. There are many hybrid vehicles that currently may qualify for this tax credit. According to the IRS, "Taxpayers may claim the credit on their 2007 tax returns only if they placed a qualified hybrid vehicle in service in 2007." Further, the IRS has stated that "as of March 2007, more than 40 different models of hybrids were/are eligible for the credit."

What factors determine how much Tax Credit can be claimed?
A taxpayer who bought a hybrid vehicle in 2007 may be entitled to a tax credit on the 2007 return. For the Tax Year 2007, this credit is worth as much as $3,000 for the most fuel-efficient models. But, the amount of tax credit depends on the following factors:

1. The Make of the hybrid vehicle.
2. The Model of the vehicle.
3. When the vehicle was purchased.

The tax credit for hybrid vehicles, called the Alternative Motor Vehicle Credit, applies to vehicles purchased or placed in service on or after January 1, 2006.

Who can claim this Hybrid Tax Credit?
In order to qualify to receive this tax credit, the taxpayer must be the original purchaser of a new qualifying vehicle. Hence, it would not be available to taxpayers who are leasing a hybrid vehicle!

What are the IRS Limits set on total amount of annual available Tax Credits?
The IRS has ruled "if 60,000 hybrid or advance lean burn technology vehicles of a particular manufacturer are sold, the tax credit is reduced and eventually eliminated. The full credit can be claimed up to the end of the third month after the quarter in which the manufacturer sells its 60,000th hybrid vehicle."

You can go to the IRS.gov website and search for “qualified hybrid vehicles to determine if your vehicle qualifies for this tax credit. Also, for more information on this subject, please refer to Form 8910, Alternative Motor Vehicle Credit.

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