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Phase-outs begin for Toyota, Lexus hybrid tax credits

November 18, 2010

The tax credit available for purchasing a qualified Toyota or Lexus hybrid vehicle was reduced by 50 percent for vehicles purchased after Oct. 1.


Beginning April 1, 2007, only 25 percent of the credit amount will be available. And after Oct. 1, 2007, the tax credit will no longer be available for Toyota or Lexus hybrid vehicles. 

The clean-fuel vehicle tax deduction that was available to consumers in 2004 and 2005 was replaced in 2006 with a tax credit for the purchase of hybrid vehicles and advance lean burn technology vehicles.

Unlike the former deduction, the tax credit amount varies among qualified vehicles and phase-out begins two calendar-year quarters after the quarter when a manufacturer’s cumulative sales of qualified vehicles to dealers reach 60,000 vehicles.


The IRS said that Toyota reached that threshold in the second quarter of 2006 and, therefore, triggered the tax credit phase-out.