Don't Mess With Taxes

Time is rapidly running out for a tax break available to purchasers of fuel-efficient autos produced by Toyota or Lexus.

You just have until Sept. 30 to buy one of the Japanese automaker's hybrid models in order to claim the full tax credit on your 2006 tax return. Come Oct. 1, the credit is slashed in half for each Toyota/Lexus hybrid model.

If you can drive off a dealer's lot in just a little over a week, you can claim one of the following credits next filing season:

• 2007 Toyota Camry Hybrid -- $2,600
• 2007 Lexus GS 450h -- $1,550
• 2006 Toyota Prius -- $3,150   
• 2006 Toyota Highlander 4WD Hybrid -- $2,600 
• 2006 Toyota Highlander 2WD Hybrid -- $2,600   
• 2006 Lexus RX400h 2WD -- $2,200   
• 2006 Lexus RX400h 4WD -- $2,200   
• 2005 Toyota Prius -- $3,150

If you miss the deadline, though, and buy a Toyota/Lexus hybrid between Oct. 1 and March 31, 2007, the IRS says you'll only be able to claim:

• 2007 Camry Hybrid -- $1,300   
• 2007 Lexus GS 450h -- $775   
• 2006 Prius -- $1,575   
• 2006  Highlander 4WD Hybrid -- $1,300   
• 2006 Highlander 2WD Hybrid -- $1,300   
• 2006 Lexus RX400h 2WD -- $1,100   
• 2006 Lexus RX400h 4WD -- $1,100   
• 2005 Prius -- $1,575 

The credit is cut even more for eligible Toyota/Lexus autos purchased between April 1, 2007, and Sept. 30, 2007:

• 2007 Camry Hybrid -- $650   
• 2007 Lexus GS 450h -- $387.50 
• 2006 Prius -- $787.50   
• 2006  Highlander 4WD Hybrid -- $650 
• 2006 Highlander 2WD Hybrid -- $650   
• 2006 Lexus RX400h 2WD -- $550 
• 2006 Lexus RX400h 4WD -- $550 
• 2005 Prius -- $787.50

And on Oct. 1, 2007, you'll get no tax break at all for buying a Toyota or Lexus hybrid.

You can read about the logic (?) behind the credit phase-out in this blog entry (60,000 countdown clock section) and find links to the still-maximum credits for hybrids produced by other auto manufacturers in this one, as well as in this story I wrote for Bankrate.com. The official word from the IRS can be found in this notice.

And if you're still trying to decide, especially since gas prices have come down a bit and given you some time to reassess your driving needs, check out Ideal Bite's analysis of hybrid vs. biodiesel.