New Car Tax Credit
If you are considering buying a car, you should take into consideration the new car tax credit before deciding what to buy. Depending on what kind of new car you buy, you may be eligible for a tax break. A tax credit may make the cost of a new car worth it, but do your research because certain tax credits expired as of December 21, 2010. Keep in mind these tips as you look at new cars.
- The new car tax credit phases out each year. Once a car manufacturer sells 200,000 vehicles the credits start to phase out. Once it hits this number, the tax credit reduces by 50 percent. In the fourth quarter of the year, the credit reduces again by another 25 percent.
- New car tax credit can only be used by the original owner. The original owner of the car will get the credit after they file their taxes in the following year. Car buyers cannot think of the tax credit as an instant rebate. The full price of the car will need to be financed and car payments are based on this amount.
- Programs available after 2010. As of 2011, there are two types of cars that are available for the new car tax credit: the electric and the plug-in-hybrid. The electric cars available are the 2011 Nissan Leaf and the 2010 Tesla Roadster. The plug-in-hybrid that is available for the tax credit is the 2011 Chevrolet Volt.
- Leased cars. Since many people like to lease new cars as a way to save money, it is important to know that lessees are not eligible for the new car tax credit. The dealership that leases you the car can claim the credit. It may be worth it to try for a deal on the lease though since they are saving money.