IRS Updates Hybrid Vehicles Credit Rules

The Internal Revenue Service said that owners of thousands of Ford, Toyota and Lexus hybrid vehicles can continue to claim the Alternative Motor Vehicle Credit, but the phase-out period for claiming the credit has already begun for Toyota and Lexus owners because of strong sales of the company's hybrids.

The IRS said Ford sold 6,272 qualifying vehicles to retail dealers during the quarter ending June 30, including the Ford Escape and Mercury Mariner . The credits ranged from $1,950 to $3,000. Taxpayers can claim the full amount of the credit up to the end of the first full calendar quarter in which Ford sells its 60,000th vehicle. So far, Ford has reported selling 33,547 qualifying hybrids.

Toyota and Lexus owners can also continue to claim the Alternative Motor Vehicle Credit.

However, the phase-out period for Toyota and Lexus vehicles began on Oct. 1, 2006. Toyota and its Lexus division sold 70,641 qualifying vehicles, including the Prius and Highlander , to retail dealers in the quarter ending June 30, 2007, putting them way above Ford's total. Toyota sold 344,083 qualifying hybrid vehicles from Jan. 1, 2006 to June 30, 2007, and it sold its 60,000th vehicle back in the quarter ending June 30, 2006.

For qualifying vehicles purchased between Oct. 1, 2006, and March 31, 2007, consumers can claim 50 percent of the credit amount. If they purchase the vehicles between April 1, 2007, and Sept. 30, 2007, they can only claim 25 percent of the credit amount. And if they buy the Toyota and Lexus hybrids after Sept. 30, there is no credit.