Phase-out of Tax Credits for Toyota Hybrids Starts October 1st

September 27, 2006

Buyers of hybrid vehicles carrying the Toyota or Lexus brand will earn a lower tax credit as of October 1st. The U.S. Internal Revenue Service (IRS) announced on September 20th that Toyota Motor Corporation had sold more than 60,000 hybrid vehicles as of the second quarter of 2006. As required by the Energy Policy Act of 2005, the IRS is cutting the tax credit by 50 percent for the fourth quarter of 2006, which starts October 1st, through the first quarter of 2007. For the two quarters after that, which run from April 1st, 2007, through September 30th, 2007, the tax credit will again be cut in half, and a year from now the tax credit will disappear. For instance, buyers of the popular Prius can earn a tax credit of at most $1,575 as of October 1st, and on April 1st, 2007, that figure will drop to just $787. Meanwhile, tax credits remain in full force for other automakers producing hybrids. See the IRS press release and official notice (PDF 17 KB) on the Toyota tax credit phase-out, and for information about other hybrids, see the special IRS Web page for hybrid and alternative fuel vehicles. Download Adobe Reader.