Are gas prices dropping? When will they rise? There is conflicting information hybrid carabout what actually drives the cost of our fuel. CNN reports gas prices may be as low as $2.00 by Thanksgiving. While we speculate about the future cost of our fuel, there is incentive to choose alternatives.

A couple years ago, my partner purchased a massive ’85 pickup truck off Craigslist. It can lug half ton without breaking a sweat. It has three tanks: two stock 15 gallon tanks and one 50 gallon tanks. If we filled all three we could travel from our home in Oakland, California to Oklahoma City, Oklahoma without stopping for gas. The diesel fuel would cost about $260.

Here’s the beauty: the truck is a diesel that was converted to run on vegetable oil. Pavlov, as the truck is known because tailgaters drool over the smell of tempura, can get us 1,400+ miles with zero fuel cost.
We can’t all luck out with a Craigslist score like Pavlov. And truthfully, some of us like newer cars. With the cost of fuel fluctuating as frequently as it does what are our options? How can we save money?

Well, if you’re in the market for a new, off the lot car, you may want to consider hybrid cars and alternative motor vehicles. The IRS is offering very enticing tax credits.

Credits can be highly beneficial to tax payers. Credits are directly subtracted from your total tax, or the amount of federal tax you owe. Say hypothetically you earn $1000 at a 10% tax rate, you owe $100 in taxes. A $100 tax credit would reduce your taxes by $100″to zero. Think of credits as coupons that reduces the amount of your bill.

Here are the basic IRS guidelines.
1. You must be the original purchaser of a new, qualifying vehicle. The credit does not apply to used vehicles. Unfortunately Pavlov didn’t apply.
2. If the vehicle is leased to a consumer, the leasing company may claim the credit.
3. The vehicle must be used predominantly in the United States.
4. The full credit is only available for a limited time. The amount of the credit diminishes over five quarters.

Act fast to catch the largest savings. Get your car soon after it is released and you could claim the whole tax credit! Tax payers can claim 100% of the credit if you purchase the car before the end of the first quarter after the manufacturer sells 60,000. The credit reduces to 50% for the 2nd and 3rd quarters, 25% for the 4th quarter, and is phased out by the 5th quarter.

New cars are hitting the asphalt lots quickly. Time to shop! Here is a list of the Model Year 2007 credits.

  • Chevrolet Silverado 2WD Hybrid Pickup Truck ” $250
  • Chevrolet Silverado 4WD Hybrid Pickup Truck ” $650
  • Ford Escape Hybrid 2WD ” $2,600
  • Ford Escape Hybrid 4WD ” $1,950
  • GMC Sierra 2WD Hybrid Pickup Truck ” $250
  • GMC Sierra 4WD Hybrid Pickup Truck ” $650
  • Lexus GS 450h ” $1,550
  • Mercury Mariner 4WD Hybrid ” $1,950
  • Saturn Vue Green Line ” $650
  • Toyota Camry Hybrid ” $2,600

For more information visit
http://www.irs.gov/newsroom/article/0,,id=157632,00.html
or http://www.fueleconomy.gov/feg/diesel.shtml.

This credit can be tricky to calculate because of the clause “first quarter after the manufacturer sells 60,000.” Remember the amount of your credit may vary. For more information send me an e-mail, or contact a licensed tax professional.