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Tax credits / incentives for hybrids?



  • gagricegagrice San DiegoPosts: 28,852
    You are probably right. There are a lot of people that do not research before they buy. I cannot imagine anyone buying a Hybrid before 2006 unless it is deeply discounted. IF they are aware of the tax credits that will be available. Also this new energy bill includes diesel vehicles. So we will have more choices next year in at least 45 of the 50 states.
  • stevedebistevedebi LAPosts: 3,788
    I think the conservation credit was an either/or. Also, I think they may be using the combined mileage, wihch is 56, I think? That is what I based my $1600 on.
  • Here is the results of my research. Obviously, the conclusions depend on the numbers I put in, and whether I understand the bill correctly. I will explain where the numbers come from and how I made the calculations, then if you believe any of the numbers are wrong, you can make your own amendments.

    These analysis is based on purchasing 2005 vehicles (for which we have data) in 2006 (when the tax credits begin).

    Three tables come from this energy bill text, starting on page 1391.

    1) 2002 Model Year Fuel Economy by Inertia Weight Class (pg. 1395)
    Passenger Cars
    lbs. mpg
    1,500 45.2
    1,750 45.2
    2,000 39.6
    2,250 35.2
    2,500 31.7
    2,750 28.8
    3,000 26.4
    3,500 22.6
    4,000 19.8
    4,500 17.6

    2) Credit Amount for Fuel Economy Ratio (fuel economy of hybrid divided by 2002 vehicle in same inertia weight class) (pg. 1398)

    fuel economy ratio: credit
    125%-150%: $ 400
    150%-175%: $ 800
    175%-200%: $1,200
    200%-225%: $1,600
    225%-250%: $2,000

    3) Credit Amount for Lifetime Fuel Savings (pg. 1400)

    Lifetime fuel savings is A minus B, where A is 120,000 miles divided by hybrid's inertia weight class's city fuel economy in 2002 and B is 120,000 miles divided by hybrid's city fuel economy.

    Lifetime fuel savings (gals): credit
    1,200-1,800: $ 250
    1,800-2,400: $ 500
    2,400-3,000: $ 750
    3,000- : $1,000
  • (for Part I, see post above)
    Now, as a post above suggested, I did a google on "inertia weight class" and found some suggestions that for the Honda Civic Hybrid and the Toyota Prius are in the 3,000 IWC. The facts that I read said: (1) round down IW to determine IWC, (2) IW is approximated by adding 300 lbs. to stated (curb) weight, and (3) the HCH weighs 2,732 lbs., and the TP weighs 2,890 lbs. Using these 3 facts imply a 3,000 IWC for the HCH and the TP.

    Also, I found a table that listed the HCH and the TP as 3,000 IWC. Incidentally, the Honda Insight was listed at 2,000 or 2,250 IWC in the same table, depending on the transmission.

    It is not clear to me for table 2 what number to use for the fuel economy of the hybrid. However, since table 3 uses the current city fuel economy, I will use that when calculating ratios used in table 2.

    Finally, here are the calculations:
    the 2002 city fuel economy for the 3,000 IWC: 26.4 mpg
    for the 2005 HCH CVT: 48 mpg
    for the 2005 TP: 60 mpg

    Thus, from table 2:
    HCH CVT: 48/26.4 = 182% --> $1,200 credit
    TP: 60/26.4 = 227% --> $2,000 credit
    Note that the TP barely makes it into the $2,000 category.

    And, from table 3:
    HCH CVT: 120,000/26.4 - 120,000/48 = 2,045 gal saved --> $500
    TP: 120,000/26.4 - 120,000/60 = 2,545 gal saved --> $750 credit
    Note that the TP barely makes it into the $750 category.

    Thus, the total credits are:
    HCH CVT: $1,700
    TP: $2,750

    However, the TP numbers may be too optimistic. A spokesperson for Toyota in a
    USA Today article on the new energy bill said the Prius may qualify for about $2,400.

    I welcome critical evaluation of this analysis.
  • stevedebistevedebi LAPosts: 3,788
    I'm not sure, but the TP may be based on the combined mileage, not the highest mileage. I thought that the Prius Combined MPG was in the low fifties?
  • The document states "a fuel economy", but I can't seem to find out how it is defined. If, as you suggest, it's a weighted average of city and highway driving, then, consulting the EPA numbers, I'll try these numbers:
    HCH CVT: 47 mpg (48 city/47 hwy)
    TP: 54 mpg (60 city/51 hwy)

    The credits from lifetime fuel savings remained unchanged:
    The HCH CVT receives a $500 credit; the TP receives a $750 credit.

    The credits for fuel economy improvement change for the TP:
    Then, from table 2:
    TP: 54/26.4 = 201% --> $1,600 credit

    HCH CVT's total credit remains:
    HCH CVT: $1,700

    And the amended TP total credit is:
    TP: $2,350
  • gagricegagrice San DiegoPosts: 28,852
    In you research did you find what incentives they will offer for diesel cars?
  • otis1otis1 Posts: 142
    ugh... politicians....

    Ok so this "vehicle inertia weight class" is a big deal b/c this is what the hybrid mileage is compared to. So I actually looked up 42 usc 7521. NOT ONCE does it ever mention "inertia." So ok, I check out 42 usc 7550 which is titled "Definitions." But guess what, no "inertia" mentioned at all. I'm thinking someone meant to write "Gross Vehicle Weight Rating" instead of "inertia weight class" If you look at the bill, p 1402, line 4-6, "blah blah passenger automobile or light truck and which has a GVWR of not more than 8500 lbs ..." and the table listing the 2002 city mileages which you're suppose to reference, goes up to 8500 lbs. hmmmm, I gotta wonder if I can use GVWR for my calculations.

    IF that's the case, then a HH AWD should be eligible for $1600 + $1000 credit using a GVWR of 5500. What's interesting is the HH FWD- using the same assumptions, it actually qualifies for the $2000 fuel economy credit IF it uses the "Passenger Automobile" table instead of the "Light Truck" table. I'm also just using City MPG since that's whats labeled in the table headers.
  • jveatchjveatch Posts: 2
    I have been unable to determine if the new energy Policy Act of 2005 allows one to use a tax credit in purchasing a 2006 Toyota Prius prior to January 1, 2006. It seems some parts are effective the moment President Bush signed the new law. In the Section 1341 of HR6 it referes to "a new qualified hybrid motor vehicle placed in service by the taxpayer during the taxable year ..." Does that mean a 2006 hybrid can use the tax credit in 2005 if purchased and placed into service in 2005, like maybe late September or October? If this is not the case, then I would think the automobile dealers will have a very difficult time selling the new year models during the last 3 or so months of 2005.
  • Anyone know how this limit on the # vehicles for which the tax credit is applicable, is going to be implemented? How does a buyer know that his is one of the 1st 60k vehicles sold by the manufacturer after the bill's effective date? I suppose if someone buys 2 eligible vehicles, he can't claim the credit twice. But his 2nd credit would be lost; that credit wouldn't go to 60001st buyer?
  • gagricegagrice San DiegoPosts: 28,852
    Welcome to the forum. That is a darn good question that I have had also. When it gets down to the wire and a dealer in CA sells number 60k the same time a dealer in NY sells # 60k, who gets the tax break. Like was said before I think this was put in to equalize the playing field. Right now Toyota is the only one that would be able to build 60k hybrids in one year. Honda my gear up for that kind of sales. None of the Big 3 will sell that many in 2006. Unless it includes diesel cars with high mileage. Then all the majors will get involved.
  • otis1otis1 Posts: 142
    The law is kinda hard to read, but the credit is phased out the 2nd quarter after a manufacturer sells 60k hybrids. So let's say from Jan-Mar, toyota sells 59,999 hybrids. Then toyota presumably hits their quota during Q2. So anyone who buys their hybrid between Q1 through Q3 gets the FULL credit. Q4 and Q1 07 get 50% credit, and Q2 and Q3 07 get 25% credit.

    You don't have to be one of the first 60,000 hybrids- you just have to buy it within 3-5 months after the 60,000th hybrid is sold to get the FULL credit.
  • gagricegagrice San DiegoPosts: 28,852
    That makes a lot more sense than trying to pin down 60k cars. Thanks for the research.
  • jveatchjveatch Posts: 2
    But the question is still "can you buy a Prius after the President signed the Energy Policy Act of 2005 (on August 8th) and apply it to the 2005 tax year if you put the car in service during 2005 but after August 8th. I didn't see any quotas in the Act. Are you sure you aren't mixing up the Federal Tax Credit with the State of California policy?
  • Why does the vehicle have to be a 2006 model? At the end of section 30B (amendment of section 1341): "the amendments made by this section shall apply to property placed in service after 12/31/2005, in taxable years ending after such date". I read that to mean that any new qualifying car of any model year bought any time, but placed in service in 2006, would be eligible for the credit. Too liberal a reading?
  • otis1otis1 Posts: 142
    check out section (f) which starts on p1417. There it discusses when the credit starts (after 12/31/05) and the limitations (quota). As I interpret it, it doesn't matter when you order you car, it only matters when you sign on that dotted line and take delivery of your car. so if you order you prius in dec, and it shows up in Jan, then you're ok. i have no idea what the california policy is since I don't live there.
  • mirthmirth Posts: 1,212
    so if you order you prius in dec, and it shows up in Jan, then you're ok.

    I predict a slooooowwwww Nov and Dec for Prius sales, lol.
  • part f on pg 1417 gives the date at which they start counting towards 60000. But since a previous poster clarified that the 60000 figure is to determine the phase-out quarter, not the exact number of buyers eligible for 100% credit, the date in part f isn't the effective date of the tax credit (end of section 30b pg 1426). They do happen to be the same.
    What's the definition of "placed in service"? If the vehicle is registered as non-operating, is that considered "in service"?
  • stevedebistevedebi LAPosts: 3,788
    " If the vehicle is registered as non-operating, is that considered "in service"?"

    Just out of curiosity, why would you buy a new Prius and register it as non-operating?
This discussion has been closed.