• Tax incentives Energy Policy Act of 2005.

The Energy Policy Act of 2005 created incentives to encourage the purchase of low emission vehicles. The Energy Independence and Security Act of 2007 expanded these incentives to include emerging electric vehicle, and plug in hybrid, technology. The Energy Improvement and Extension Act of 2008 only acted to push back tax credit-claiming deadlines and include more electric vehicles in existing incentive programs. Although many speculated that more recent stimulus legislation would greatly expand existing incentive programs, but the legislation disappointed many. When passed, the American Recovery and Reinvestment Act of 2009 focused more on green infrastructure than personal transportation incentives. The act did allocate money however to equip government agencies with more efficient vehicles, created a grant program for diesel owners wishing to outfit their cars with cleaner burning technology, and added a significant tax incentive program for plug-in hybrids.

The tax incentives that are the result of the Energy Policy Act of 2005 are offered to make pricier, but more environmentally friendly vehicles more appealing. Many potential buyers will require economic incentive to purchase a more expensive LEV over an automobile that runs on gasoline, so a tax credit is offered to effectively cheapen the LEV and encourage the purchase of more environmentally friendly automobiles.

The characteristics and availability of an offered tax credit will vary in accordance with the characteristics and popularity of the car in question, respectively. The size of the offered tax credit typically corresponds in value to the amount of money that the technology in question adds to the manufacture price of the car. Existing incentive programs are also set to phase out after a given maker sells 60,000 hybrid vehicles, so more popular models like the Toyota Prius are no longer subject to a tax credit.

The federal government now lists models that are pre-approved to receive a tax credit; some other models may qualify on an ad hoc basis.

- Classifications for tax credit certified vehicles

Diesel: Because diesel engines are typically more fuel efficient, and can run on cleaner blends of diesel fuel, diesel powered car buyers qualify for federal tax credits. Many Volkswagen diesel models are currently pre-approved for a tax credit of between $1,000 and $1,700. Because diesels are less common in the U.S. than standard gasoline cars, there are many more remaining tax credits for these Volkswagen models than there are for popular hybrid models like the Toyota Prius.

Alternative fuel vehicles: Currently the only pre-approved alternative fuel vehicle is the Honda Civic GX, which runs on compressed natural gas, a fossil fuel that burns cleaner than standard gasoline. Currently the standard credit for a qualified alternative fuel vehicle is $4,00. Other than the Civic GX, a number of models produced after 2004 may qualify for tax credits.

Electric vehicles: Government tax credit programs are planned for electric and plug-in hybrid vehicles, but no specific models have yet been certified.