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Hybrid Incentives

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When hybrids were introduced in the United States in 2000, many federal, regional, and local governments quickly signed incentives into law. The list of hybrid perks included tax breaks, access into carpool lanes while driving solo, and free parking. But several of those incentives have been phased out, and others are in limbo.

Tax Credits
Federal tax incentives for hybrids range from a few hundred dollars for a Saturn Vue Green Line to thousands of dollars for a Ford Escape Hybrid. You'll want to check with the IRS before you buy, as hybrid tax laws take several twists and turns. For examples, the tax break for the Toyota Prius was $3,150—but because the IRS capped tax credits for Toyota vehicles at 60,000, the government is no longer granting credits for Toyota and Lexus hybrids. Honda hybrid incentives also are being phased out, and will be completely gone by early 2009.

One other potential wrinkle is the Alternative Minimum Tax. If you are eligible for multiple tax credits, the hybrid tax credit is taken last after all other credits (e.g., child care tax credit, mortgage credit, retirement savings credit) have been taken. Any tax liability left over by these reductions will be the maximum dollar limit of your hybrid tax credit. If your hybrid tax credit exceeds your maximum dollar limit, the excess is not refundable, and is lost forever. As you might guess, it's a good idea to get advice from a tax professional before filing.

Additional basic rules to keep in mind:

  • The credit is only available to the original purchaser of a qualifying hybrid vehicle.
  • The vehicle must be used predominantly within the United States.
  • The credit amount is based on the purchase date of the vehicle.

Free Parking
The City of Los Angeles, which had been offering free parking to hybrids, is reconsidering that privilege. In nearby Santa Monica, the Municipal Code still allows hybrid vehicles to park in any metered parking space in the city without charge for the maximum amount of time allowed by that meter. In other words, if you're at a two-hour meter, you can park there free for two hours—but beyond that, you're subject to ticketing for overstaying your welcome. Hybrid car owners who purchased their hybrids from San Jose dealers are exempt from local parking fees.

Carpool Lane Access
The California Department of Motor Vehicles no longer accepts applications from drivers who own a Toyota Prius, Honda Civic or older Honda Insight hybrids for carpool stickers. State law allowed the DMV to issue 85,000 stickers to certain hybrid drivers on a first-come, first-served basis. DMV Spokesman Steve Haskins said that his agency had 700 applications over that level and no longer wanted motorists to send in applications. "We have no more stickers available to issue and any applications sent to DMV will likely not be successfully processed," Haskins said. "Any unprocessed applications and checks will be returned as soon as the last of the stickers are mailed to customers."

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Hybrid Incentives