Finance Tax Time

Between global warming and massive increases in fuel prices, many people are reconsidering their transportation. Honda has two natural gas cars the IRS absolutely loves.

In 2005, the federal government passed a new energy policy act that created tax benefits for the use of alternative fuel vehicles. Most people are generally aware of this given the fact they get a tax credit break when they purchase a hybrid vehicle. What fewer people know, however, is they get massive tax breaks if they purchase a natural gas powered vehicle such as a Honda Civic GX.

Buried within the language of the new energy policy act is the Alterative Motor Vehicle Credit. The AMVC goes well above and beyond the financial benefits granted to hybrid cars. The act defines four distinct areas where the IRS must issue significant tax credits. Those categories include fuel cell vehicles, advanced lean burn technologies, hybrid vehicles and alternative fuel vehicles. While most vehicles fall within the hybrid classification, new models are coming on the market that fall within the remaining three.

Indeed, the IRS has just issued the tax credit amounts that can be claimed by individuals that purchase the Honda natural gas models. Specifically, the tax credit amount is $4,000 if you purchase either the 2006 or 2007 Honda Civic GX. The car must be purchased new and directly form a dealer. Please note, these cars run only on natural gas, which is why they get such a big tax credit.

This $4,000 tax credit is a major financial incentive for most taxpayers. Unlike a tax deduction, a tax credit is applied directly to the amount of money you owe the IRS. If you prepare your tax returns and determine you owe $7,000 to the IRS, the tax credit would reduce this amount to $3,000. In short, we are talking about major savings.

There is little dispute that we are facing significant issues related to energy. From global warming to our reliance on foreign sources for fuel, things are pretty bleak. The transition to alternative fuel sources makes sense, and now the tax credit for natural gas powered vehicles makes financial sense as well.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

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As 2006 rolls along, the IRS is in the process of issuing tax credit amounts to particular hybrid vehicles. The agency has just issued the amounts for a number of GM vehicles.

As part of the Energy Policy Act of 2005, the tax advantages of owning a hybrid vehicle have been seriously upgraded. Prior to the Act, a person that purchased such a vehicle could claim a tax deduction of up to $2,000. While this was nice, the new Act changed the deduction into a tax credit. Tax credits are far better than tax deductions because they are reduced directly from the tax you owe, not your gross income.

Through 2006, the IRS is working its way through various hybrid models and issuing the amount of tax credit that can be claimed for each. Makes include Honda, Toyota, Ford, Lexus and just about every vehicle in the class. On July 11, 2006, the IRS issued a slew of tax credit determinations for hybrid trucks made by General Motors.

If you purchase a new GM hybrid truck, you will now be able to claim a tax credit on your tax returns. The models and amount of the tax credit that can be claimed are as follows:

1. $650 dollars for 2006 GMC Sierra (4WD) hybrid pickup truck.

2. $650 dollars for 2007 GMC Sierra (4WD) hybrid pickup truck.

3. $650 dollars for 2006 Chevrolet Silverado (4WD) hybrid pickup truck.

4. $650 dollars for 2007 Chevrolet Silverado (4WD) hybrid pickup truck.

5. $250 dollars for 2006 GMC Sierra (2WD) hybrid pickup truck.

6. $250 dollars for 2007 GMC Sierra (2WD) hybrid pickup truck.

7. $250 dollars for 2006 Chevrolet Silverado (2WD) hybrid pickup truck.

8. $250 dollars for 2007 Chevrolet Silverado (2WD) hybrid pick up truck.

To claim the tax credit, you must purchase any of the above vehicles from a dealer after January 1, 2006. The vehicle must also be new, not used. As an aside, the tax credit amount will drop after the 60,000th model has been sold, so you may want to buy now if you are considering any of these vehicles.

Tax credits for purchasing a hybrid are a tremendous benefit when it comes to filing your returns. Since the tax credit amount is reduced directly from the amount you owe, it can make for some very nice refunds.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes.

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Many companies offer their employees cash incentives to undertake certain actions such as buying a hybrid car. It is important to remember that such situations have tax consequences

Employer Cash Incentives To Employees For Hybrids

Purchasing a hybrid vehicle makes sense on many fronts. It is a financial windfall given tax credits provided under the Energy Policy Act of 2005. Driving a hybrid has the additional financial advantage that one uses less gas, thus saving on fuel prices. Finally, hybrids are much easier on the environment given the fact they produce less pollution than traditional fossil fuel vehicles.

As is often the case, businesses tend to take action to promote socially positive steps before the federal government. Whether it is promoting healthier lifestyles or, in this case, a more green lifestyle, businesses almost always lead the way. The situation with hybrid cars is no different.

Many businesses are providing financial incentives to employees that purchase hybrid vehicles. These incentives can be significant. They often are offered in the form of cash payments, contributions to retirement plans and even stock options. As you might image, employees are taking advantage of the situation.

There is, however, one cautionary not for both businesses and employees when it comes to incentives for hybrids. The act of transferring wealth to the employees is considered a taxable event. Simply put, the employees must claim the amount of the incentive as income when reporting taxes. The employer is responsible for reporting said income as part of the reported W-2 wages and the employee must pay the relevant taxes.

There is one exception to this taxable income rule. If the employer is actually producing the product in question, then no taxable event occurs. In the case of the hybrid incentives, this exception would obviously only apply to employees of vehicle manufactures actually building the hybrids, to wit, Honda, Toyota, Ford, GM and so on.

The decision by many companies to offer incentives to motivate employees to purchase hybrids is laudable. It is important, however, that both employers and employees understand the tax consequences.

Richard A. Chapo is with BusinessTaxRecovery.com - providing tax information.

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