IRS TAX NOTES

IRS publishes credit amounts for hybrid vehicles

The Energy Policy Act of 2005 provided for tax credits of up to $3,400 to encourage taxpayers to buy fuel-efficient vehicles. The IRS has calculated the following amounts of credit taxpayers can take this year for the purchase of a new hybrid vehicle.

• 2005 and 2006 Toyota Prius – $3,150.
• 2006 Toyota Highlander Hybrid – $2,600.
• 2006 Lexus RX400h – $2,200.
• 2006 Ford Escape Hybrid – $2,600; 4WD – $1,950.
• 2006 Mercury Mariner Hybrid – $1,950.
• 2007 Toyota Camry Hybrid – $2,600.
• 2007 Lexus GS 450h – $1,550.

Don't lend money to the IRS

Billions of dollars in refunds are being sent to taxpayers who overpaid their 2005 income taxes. The average refund amount is $2,290. If you get a large 2005 tax refund, consider adjusting this year's withholding or estimated tax payments to more closely match what you're likely to owe for 2006. A large refund means you are actually lending the government your money interest-free.

IRS announces 2006 vehicle depreciation

The IRS has issued the depreciation limits for business cars first placed in service in 2006. For passenger cars, the limits are $2,960 for 2006, $4,800 for 2007, $2,850 for 2008, and $1,775 for each year thereafter.

For trucks and vans first placed in service in 2006, the limits are $3,260 for 2006, $5,200 for 2007, $3,150 for 2008, and $1,875 for each year thereafter.

Electric vehicles first placed into business use this year have the following depreciation limits: $8,980 for 2006, $14,400 for 2007, $8,650 for 2008, and $5,225 for each year thereafter.