Owners of the increasingly fashionable hybrids can write off $2,000 of the purchase price for these vehicles, which combine an electric motor with a gasoline-powered engine to produce fewer emissions. This should give the many Hollywood stars who own such environment-friendly autos slightly lower tax bills.
http://www.bankrate.com/brm/search/story-autos.asp
Fed Write this off is noted for One year..
But on Jan. 1, the Energy Tax Incentives Act of 2005 took effect. Now buyers of environmentally friendly cars and trucks will get a tax credit on their returns to help offset the vehicle's cost.
This is much better than the previously allowed deduction, since with a tax credit, once you determine what you owe, the credit directly cuts your tax bill. It might even wipe out any taxes you owe. In essence, credits are more valuable tax breaks than deductions, since credits reduce your tax bill dollar for dollar.
Making the credit list
Exactly how much of a 2006 tax credit your vehicle provides, however, depends on a couple of factors.
Under the law, the maximum potential credit amount is $3,400, based on a combination of the qualifying vehicle's fuel economy and total expected lifetime fuel savings, using 2002 fuel efficiency numbers as a base. But the exact tax break figure per vehicle could be less.