Tax Credit for Toyota Hybrids Shrink

The Internal Revenue Service has announced that tax credits for Toyota hybrid vehicles will be reduced because the company has hit the legal production limit - 60,000 vehicles - that Congress imposed on vehicles eligible for a tax credit, the Associated Press reported.

This means that federal tax credits for Toyota and Lexus hybrid vehicles will be cut in half beginning in October.

The $3,150 credit for the Toyota Prius, the largest hybrid tax credit so far, will be reduced to $1,575 starting Oct 1, and credits for other Toyota hybrids, including certain Camry, Highlander and Lexus vehicles, will fall to between $775 to $1,300.

Under the schedule set by the hybrid tax credit law, the tax break will be cut in half again to 25% of its original value six months later. Starting April 1, 2007, the tax credit for the Prius will be $787.50, and credits for other Toyota and Lexus vehicles will range from $387.50 to $650.

No credits can be claimed for the purchase of Toyota hybrid vehicles beginning Oct. 1, 2007.

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