Learn To Save More
Tax Deductions for Your 2020 Hybrid Automobile
Recently for alternative fuel strategies, much confusion has arisen regarding tax incentives for hybrid vehicles. This article clarifies the issue for you.
Tax Deductions for Your 2020/2021 Hybrid Automobile
People buy hybrid vehicles for different reasons. They are good for the environment. They get much better mileage, which saves money. There are tax incentives for buying them. With the recent energy plan put in place by the federal government, there is a lot of confusion regarding the tax incentives.
Specifically, the question for most people is whether they can claim a tax deduction or a tax credit when they buy a hybrid. Here is the breakdown:
- The Good – If you purchased a hybrid vehicle in 2020, you can claim a tax deduction.
- The Bad – If you purchased a hybrid vehicle in 2020, you cannot claim a tax credit.
- The Ugly – If you had waited till 2021, you could have claimed a tax credit.
Recent alternative fuel strategies, much confusion has arisen regarding tax incentives for hybrid vehicles. This article clarifies the issue for you.
Tax credits save you a lot more money than tax deductions. Tax deductions are applied to your gross income like any other deduction. This helps lower your tax bill, but tax credits are much more powerful. Tax credits are not taken out of your gross income. Instead, tax credits are taken out of the exact amount of tax you owe the government. If you owe the government $10,000 after filling out your tax return and can claim a $7,000 tax credit, your final tax bill is $3,000.
You are stuck with a tax deduction if you purchased a hybrid in 2020, but at least it is a nice one. The deduction amount is $7,500 for vehicles certified by the IRS. They include:
- Audi: 2020–2021 e-tron Sportback
- BMW: 2014–2021 i3 Sedan
- Chevrolet: 2017–20 Chevrolet Bolt EV
- Ford: 2020–2021 Ford Escape Plug-in Hybrid
- Honda: 2018–2021 Honda Clarity Plug-in Hybrid
- Hyundai: 2017–2020 Ioniq Electric
- Tesla: 2016–2020 Model X
- Toyota: 2021 RAV4 Prime Plug-In Hybrid
- And a lot more,…
To claim this deduction, you must have purchased within the time limit that IRS has defined.
Check your vehicle credit by visiting U.S. Department of Energy website here.