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The Federal Government has encouraged the use of different transportation fuels by allowing tax credits on vehicle purchases. The purchase of a traditional (non-plug-in) hybrid vehicle was eligible for a tax credit of up to $3,400 from 2005 through 2010. Diesels, which are more efficient than gasoline vehicles, were eligible for a similar tax credit, as were alternative-fuel vehicles. All of those credits were discontinued at the end of calendar year 2010. Now, electric vehicles and plug-in hybrid-electric vehicles are the only ones for which a tax credit is available โ€“ up to $7,500. To find out more about these tax credits, go to the IRS website, or FuelEconomy.Gov.

Federal Government Tax Incentives for Advanced Technology Vehicles
Vehicle Type Calendar Year in which
the Vehicle was Purchased
Maximum Credit Amount Vehicles Currently Eligible for a Tax Credit
Plug-in Hybrid-Electric Vehicles 2010 - on* $7,500
2011 Chevrolet Volt
2011 Chevrolet Volt
Electric Vehicles 2009 - on*# $7,500
2010 Coda Sedan
2010 Coda Sedan
2011 Nissan Leaf
2011 Nissan Leaf
2011 Smart For Two
2011 Smart For Two
2008-2010 Tesla Roadster
2008-2010 Tesla Roadster
2011 Wheego
2011 Wheego LiFe
Hybrids 2005 - 2010 $3,400 Purchases made after
December 31, 2010
are not eligible for the tax credit.
Diesels 2005 - 2010 $3,400
Compressed Natural Gas 2005 - 2010 $3,400
Liquefied Natural Gas 2005 - 2010 $3,400
Liquefied Petroleum Gas 2005 - 2010 $3,400
Hydrogen 2005 - 2010 $3,400
M85 (85% Methanol) 2005 - 2010 $3,400

Source: U.S. Department of Energy and U.S. Environmental Protection Agency, www.fueleconomy.gov website, June 2011.
* Phase-out of this tax credit is determined by the number of vehicles produced.
# Requirements for this credit changed between 2009 and 2010.

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