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    Briefly Noted

    Add a Tax Break to Your Tank: Hybrids

    If high gas prices have you thinking about buying a more fuel-efficient car, you’ll want to learn more about the tax credit available to Americans who buy qualifying hybrid vehicles. Hybrids combine an electric motor with a gasoline-powered engine, producing fewer emissions.

    Beginning this year, consumers who buy environmentally friendly hybrid cars and SUVs may be eligible for an income tax credit of up to $3,400, reports the Pennsylvania Institute of Certified Public Accountants (PICPA). The amount depends on the make and model of the hybrid and the number of vehicles manufactured. The vehicle does not have to be used in a trade or business to qualify for the credit.

    The new tax credit is better than the previous tax deduction of $2,000, because a tax credit directly cuts your tax bill, reducing the tax you owe dollar-for-dollar. A tax deduction, by contrast, reduces your taxable income.

    The credit was part of the Energy Policy Act of 2005. It may only be claimed by the original owner of a new, qualifying hybrid vehicle. It does not apply if you purchase a used hybrid. Additionally, the tax credit is denied if you purchase the car with the intention of turning around and reselling it. The formula used to compute the tax credit involves calculating the hybrid’s fuel economy and total expected lifetime fuel savings. The better a hybrid does in these two computations, the larger the tax credit.

    The IRS has released an official list of vehicles eligible for the credit and the credit amount buyers can claim on returns filed in 2007. Here are some examples.

    • 2006 Ford Escape Hybrid, front-wheel drive, $2,600
    • 2006 Ford Escape Hybrid, four-wheel drive, $1,950
    • 2006 Mercury Mariner Hybrid, four-wheel drive, $1,950
    • 2006 Lexus RX400h, two-wheel drive and four-wheel drive, $2,200
    • 2006 Toyota Prius, $3,150

    A complete list can be found at www.irs.gov. Type “hybrid” in the keyword search.

    The new tax break is a nonrefundable credit. This means the credit can reduce your regular income tax liability to zero, but it won’t produce a tax refund. So if you purchase a hybrid that comes with a tax credit of $2,200, and your tax bill is $2,000, you’ll lose $200 of the tax value of the credit. The excess credit cannot be carried over to another year.

    The hybrid tax credit is taken after all other tax credits have been taken. You should also be aware that the hybrid tax credit does not reduce the alternative minimum tax.

    The credit is available for 60,000 vehicles from each automaker. Consumers seeking the hybrid tax credit may want to buy as soon as possible, since once an automaker has sold 60,000 hybrids, the tax credit for that automaker’s hybrid is reduced over the next five consecutive quarters. No credit is allowed after the fifth quarter.

    Here’s how it works. Beginning January 1, 2006, the full amount of the allowable credit is available through the quarter that the automaker sells 60,000 hybrid vehicles. For the next two subsequent quarters, taxpayers may claim 50% of the credit. For the fourth and fifth calendar quarters, the taxpayer is eligible to claim 25% of the credit. The credits end completely in 2010.

    What Makes Elderly Susceptible to Investment Fraud?

    The NASD Investor Education Foundation, in cooperation with WISE Senior Services and AARP Foundation, released a study that looks at why certain elderly investors are more susceptible to investment fraud than others, exposes the various tactics used by criminals to exploit seniors and offers strategies to help seniors avoid becoming victims.

    Researchers for the project analyzed undercover tapes of fraud pitches and surveyed victims and non-victims to determine how they differ.

    Some of the key research findings include:

    • Investment fraud victims are more financially literate than non-victims;
    • Investment fraud criminals use a wide array of different influence tactics—from friendship to fear and intimidation tactics—to defraud the victim;
    • Fraud pitches are tailored to match the psychological needs of the victim;
    • Investment fraud victims are more likely to listen to sales pitches;
    • Investment fraud victims are more likely to rely on their own experience and knowledge when making investment decisions;
    • Fraud victims experience more difficulties from negative life events than non-victims;
    • Investment fraud victims are more optimistic about the future;
    • Investment fraud and lottery victims dramatically under-report fraud.

    To review an executive summary of the full report or to access an audio file of real-life fraud pitches, visit www.nasdfoundation.org.

    Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD’s BrokerCheck, available for free at www.nasdbrokercheck.com. Investors can also access this service by calling 800-289-9999.

    Source: NASD Investor Education Foundation(www.nasdfoundation.org)