Hybrid, clean diesel, and plug-in cars all qualify for tax credits—due to their fuel efficiency and environment benefits. 

The exact amount of your credit may vary. Please consult a tax professional.

HYBRIDS

There were (as in past tense) great tax credits for hybrids, but unfortunately many of them have been phased out.  Toyota (including Lexus), Honda and Ford (including Mercury) hybrids no longer qualify at all for tax credits. The government put a cap of 60,000 vehicles per automaker.  Hybrids from Chevy, Mercedes and Nissan still qualify.

Here’s the entire list of tax credits, in case you bought in the past and need to know what used to be available.

Chevrolet Malibu Hybrid                    $1,300

Chevrolet Silverado Hybrid                $2,200

Chevrolet Tahoe Hybrid                     $2,200

Ford Escape Hybrid (2wd)                 $3,000

Ford Escape Hybrid (4wd)                 $2,200

Ford Fusion Hybrid                            $3,400

GMC Sierra Hybrid                            $2,200

GMC   Yukon Hybrid                         $2,200

Honda             Civic Hybrid                           $2,100

Honda             2005 Civic Hybrid (auto)        $1,700

Lexus GS 450h                                  $1,550

Lexus LS 600hL                                $450

Lexus RX 400h                                 $2,200

Mazda             Tribute Hybrid (2wd)             $3,000

Mazda             Tribute Hybrid (4wd)             $2,200

Mercedes S400 Hybrid                       $1,150

Mercury Mariner Hybrid (2wd)          $3,000

Mercury Mariner Hybrid (4wd)          $2,200

Mercury Milan Hybrid                        $3,400

Nissan             Altima Hybrid                         $2,350

Toyota Camry Hybrid                         $2,600

Toyota Highlander Hybrid                 $2,600

Toyota Prius                                        $3,150

CLEAN DIESEL

A number of diesel-powered vehicles also qualify for federal tax credits, by virtue of something called “advanced lean-burn technology.”  That’s a technical way of saying that clean diesel cars go further on a gallon of gas, and emit less greenhouse gases and other pollution.

Audi A3 TDI                                      $1,300

Audi Q7 TDI                                      $1,150

BMW 335d                                        $900

BMW X5 xDrive35d                         $1,800

Mercedes GL 320 Bluetec                  $1,800

Mercedes R320 Bluetec                      $1,550

Mercedes ML 320 Bluetec                 $900

Volkswagen Jetta TDI                                    $1,300

Volkswagen Touareg TDI                  $1,150

PLUG-IN HYBRIDS AND ELECTRIC CARS

The new shape of the green car incentive landscape tilts toward plug-in hybrids and electric cars. And the incentives are much more generous than they were for hybrids or diesels.   These cars will start to roll out in late 2010.

New Plug-in Car Purchases

Buyers of plug-in hybrids and electric cars benefit from a tax credit of $2,500 to $7,500, depending on the size of the battery in the car. On the low end of the spectrum, cars with 4 kWh battery packs will qualify for a $2,500 tax credit. The credit maxes out at $7,500 for cars with a 16 kWh battery pack, like the Chevy Volt. The credits were provided as part of the American Recovery and Reinvestement Act, otherwise known as the “stimulus bill.” The incentive begins phasing out after an automaker sells 200,000 vehicles that are eligible for the credit.

The State of California offers additional incentives. Rebates of up to $5,000 per light-duty vehicle will be available for individuals and business owners who purchase or lease new eligible zero-emission or plug-in vehicles until the funding runs out. Plug-in hybrids qualify for rebates up to $3,000, and electric motorcycles and neighborhood electric vehicles up to $1,500. Certain zero-emission commercial vehicles are eligible for rebates up to $20,000. Vehicles must be purchased or leased after official launch of the program on March 15, 2010.

Conversions

Drivers converting a car into a plug-in hybrid, or a gas-powered car into an electric vehicle, will receive a tax credit equal to 10 percent of the conversion cost. The maximum credit is $4,000 for a $40,000 conversion. These credits are only available until December 31, 2011. Individual states, such as Colorado and Florida, provide additional incentives, such as rebates and state tax credits.

Charging Equipment

The federal government offers a tax credit equal to 50 percent of the cost to install a home-based charging station—with a maximum credit of $2,000 for each station. Business quality for tax credits up to $50,000 for larger installations. The cutoff is abrupt—installations must happen before the end of 2010. The equipment must be approved, but no official list of approve equipment has been issued.