Toyota Hybrid Tax Phaseout Begins October 1

Quarterly reports indicate cumulative sales of qualified hybrid vehicles by Toyota Motor Sales U.S.A. reached the 60.000-vehicle limit during the quarter ending June 30, 2006. As a result, the Internal Revenue Service (IRS) has announced that the phaseout of the tax credit available to purchasers of Toyota’s qualified hybrid vehicles will drop to 50 percent of the allowable credit amount on purchases of those vehicles made on or after October 1, 2006.


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Under the current law, the credit for buying a hybrid vehicle begins to phase out during the second quarter in which the company sells its 60,000th hybrid or lean burn technology vehicle. Vehicles purchased before October 1, 2006, qualify for the full credit. Toyota hybrid vehicles on or after that date and on or before March 30, 2007, qualify for a credit that is 50 percent of the otherwise allowable credit amount. Taxpayers purchasing qualified vehicles on or after April 1, 2007, and on or before September 30, 2007, will be eligible for only 25 percent of the otherwise allowable credit.

For the period October 1, 2006, to March 31, 2007, the allowable credit amounts on qualified Toyota vehicles are:

  • $1,575 for 2005 and 2006 Prius
  • $1,300 for 2006 Highlander 2WD and 4WD Hybrid
  • $1,100 for 2006 Lexus RX400h 2WD and 4WD Hybrid
  • $1,300 for 2007 Camry Hybrid
  • $775 for 2007 Lexus GS 450h

For the period April 1, 2007, to September 30, 2007, the allowable credit amounts on qualified Toyota vehicles are:

  • $787.50 for 2005 and 2006 Prius
  • $650 for 2006 Highlander 2WD and 4WD Hybrid
  • $550 for 2006 Lexus RX400h 2WD and 4WD Hybrid
  • $650 for 2007 Camry Hybrid
  • $387.50 for 2007 Lexus GS 450h

The tax credit available for qualified Toyota hybrid vehicles will be eliminated for purchases made on or after October 1, 2007.

In related news, the 5 millionth Camry recently rolled off the assembly line at Toyota Motor Manufacturing, Kentucky, Inc. (TMMK). TMMK, Toyota’s largest manufacturing facility in North America, also produces the Avalon sedan, Solera coupe and convertible, V6 and four-cylinder engines, as well as engine components. When the facility will begin production of the 2007 Camry hybrid in October, it will be the first Toyota hybrid vehicle to be produced in North America. TMMK, which is celebrating its 20th anniversary this year, will have the capacity to produce approximately 48,000 Camry hybrid vehicles annually.

“Once the decision was reached to make a hybrid version of our best-selling vehicle -- the Camry – the Georgetown plant was the natural choice for Toyota’s first North American hybrid production,” Gary Convis, president of TMMK and a managing officer of Toyota Motor Corporation, said in a prepared statement. "Our team members’ hard work and dedication over the last 20 years will ensure that the production of these cutting-edge vehicles in Kentucky will also be hugely successful.”

“The continued success of Prius has demonstrated consumers’ growing demand for hybrid vehicles,” Jim Press, executive vice president and chief operating officer (COO) of Toyota Motor Sales, U.S.A. and a managing officer in the Toyota Motor Corporation, said in the same media statement. “Hybrid production in the U.S. will allow us to be even more responsive to the desires of our customers.”

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