Thinking of purchasing a hybrid or other alternative fuel vehicle?

To encourage your move to a vehicle less dependent on oil, the federal government offers tax incentives for qualified vehicles. And a number of the states offer additional tax credits, HOV occupancy waivers, or other types of incentives to help you make the decision to go green.

Federal tax credits
Hybrid vehicles may be eligible for a federal income tax credit of up to $3,400. The amount of the credit depends on the make and model of the vehicle.

Once each manufacturer has sold over 60,000 eligible vehicles, the credit amounts decrease in phases, beginning the second calendar quarter after the manufacturer sells its 60,000th qualifying vehicle. The credits end completely at the beginning of the sixth quarter after the sale of the 60,000th vehicle.

Only the original owner of a new, qualifying hybrid can claim the tax credit, and the vehicle use must be predominantly within the US. For information about specific vehicles and limitations, credit amounts, and phase-out dates, see the Alternative Fuels and Advanced Vehicles Data Center site ( or the IRS site (,,id=157632,00.html).

State incentives
Benefits for owners of hybrids and alternative fuel vehicles vary from state to state. Current incentives range from a waiver of HOV occupancy requirements and state income tax credits to sales tax exemptions—and even parking perks in some communities.

Most states are considering additional incentive programs, and some programs are expiring. States also vary in the ways owners obtain the necessary certification and credentials (sticker, license plate, etc.), so you should check with your state’s department of motor vehicles to verify the programs available in your area and current requirements.

Here’s a sample of the types of benefits available to owners of hybrids and other alternative fuel vehicles at this writing.

HOV occupancy requirement waived
The nine states below allow qualified, certified vehicles to use some or all High-Occupancy-Vehicle lanes with a single occupant. Requirements vary among the states listed.

  • Arizona
  • California
  • Florida
  • Georgia
  • New Jersey
  • New York
  • Tennessee
  • Virginia
  • Utah

State income tax credits
These states provide additional tax credits for qualified vehicle according to each state’s provisions:

  • Colorado
  • Louisiana
  • Oklahoma
  • Oregon
  • South Carolina

Sales or excise tax exemptions
In these locations, vehicle owners are exempt from some portion of the sales or excise taxes on qualified vehicles:

  • Connecticut
  • District of Columbia
  • New Mexico
  • South Carolina
  • Tennessee
  • Washington

Emission inspections
Eligible hybrids are exempt from emission inspections in Maryland, Nevada, and Washington.

Free parking
Residents or visitors to certain cities in these states can take advantage of free parking for their hybrids or alternative fuel vehicles:

  • California
  • Connecticut>
  • Maryland
  • Michigan
  • Montana
  • New Mexico
  • New York
  • Texas
  • Utah



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Beth Corbitt

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