Tax credits over for buyers of Toyota hybrids

Popularity means carmaker is first to reach production cap for credits

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Toyota Motor Corp.

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updated 5:18 p.m. ET Nov. 8, 2007

WASHINGTON - Buyers of Toyota Motor Corp. hybrid gasoline-electric cars who are looking for a break on their income taxes are now out of luck.

The Internal Revenue Service said Thursday that only Toyota and Lexus hybrids purchased before Oct. 1 are eligible because the company has hit a legal cap on the credit, which is intended to encourage sales of the fuel-efficient cars.

Hybrids have the ability to switch between internal combustion engines and electric motors to power themselves, with batteries that recharge during driving. They deliver better gasoline mileage than conventional vehicles.

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Toyota's market leadership in hybrids made it inevitable that it would be the first to lose the federal tax credit.

The credit for new hybrid vehicles phases out starting when after a carmaker has sold 60,000 hybrid or other fuel-efficient vehicles. Toyota and its Lexus luxury division hit that limit last summer. After that, the tax credits were halved.

Tax credits of up to $3,000 are still available for hybrids made by Ford Motor Co., General Motors Corp., Honda Motor Co. and Nissan Motor Co.

Customers who bought one of five Toyota and Lexus hybrid models between April 1 and Sept. 30 are eligible for tax credits ranging from $450 for the $104,000 Lexus LS 600h L to $787.50 for the Prius, which sells for $20,950.