If you want to save some money on taxes, planning buying a new car and also want to save some $$$$ on gas , well buying a Hybrid car will satisfy all of your needs.

Here is some information to assist you in gaining knowledge regarding the Tax incentives that you might be eligible for.

Federal Tax Incentives

According to the clean fuel act by IRS specified in http://www.irs.gov/pub/irs-pdf/p535.pdf( See page 45) the maximum deduction you can claim for qualified clean-fuel vehicle property with respect to any motor vehicle is one of the following. This is a onetime claim.

1. $50,000 for a truck or van with a gross vehicle weight rating over 26,000 pounds or for a bus with a seating capacity of at least 20 adults (excluding the driver).
2. $5,000 for a truck or van with a gross vehicle weight rating over 10,000 pounds but not more than 26,000 pounds.
3. $2,000 for a vehicle not included in (1) or (2).

The Tax incentive is supposed to decrease by 25% each year and will be reduced to $500 in 2006 and none after 2006 for item # 3(hybrid cars). But thanks to congress it will remain at $2000 for 2004 and 2005 and will drop to $500 for 2006. If the energy bill has any new amendments then there is a possibility for continued Tax incentives. IRS might do this to encourage more people to buy hybrid cars as it is fuel efficient and economical.

Individuals must use Form 1040, not one of the shorter forms, to claim this deduction. They should put "Clean-Fuel" and the deduction amount on the dotted line to the left of line 35, including this amount in that line's total adjustments to income. (They would have used line 33 on the 2003 Form 1040; line 34 on the 2002 form; line 32 the previous two years.)

Qualifying individuals who did not claim the deduction when they filed may claim it on an amended return (Form 1040X). Generally, taxpayers may amend returns up to three years from the original return's due date. For more information also visit http://www.irs.gov/newsroom/article/0,,id=104549,00.html

For filling the 1040 you just need to write " clean fuel deduction claim" on the form. The tax benefit will differ for people with different tax brackets. If you are in higher tax bracket you could save large on your year end taxes.

Also visit http://www.eere.energy.gov/cleancities/atv/pdfs/hybrid_tax_deduction.pdf for more information

Local/ state Tax incentives

The local and state Tax incentives may vary depending upon the states and region. Some of the states that provide tax incentives are

Some of the available local tax incentives include

1) Hybrid Car owners are exempt of local parking fees if they buy the hybrid cars at the local dealers.

2) Some states offer a tax credit on certain models of hybrid cars and vehicles.

3) Some states such as Arizona, California, and Virginia etc have requested for federal approval to allow hybrid gas-electric cars to go in the rush hour HOV (high occupancy vehicle) lanes.

4) In California for vehicles running on 100% gas free methods some of the tolls are waived.

5) There are several tax credits and incentives in operating a hybrid car/automobile. Please visit the tax web sites of your concerned state or visit your accountant for getting tax deductions.