The AMT is the Alternative Minimum Tax. It was created in 1969 when it was discovered that 155 Americans had incomes over $200,000 per year and paid no Federal Income Tax. Unfortunately when Congress passed the law, they made a big mistake. (Hard to imagine, isn't it?) They did not index if for inflation.

The law decreases or eliminates certain tax credits and exemptions for high income individuals. Those credits include the hybrid vehicle credit. High income would be anyone with an income over about $50,000 per year, if Congress did not do a one time adjustment each year. They do this because, over the last 20 years, they have been unable to actually fix the law. The net result is you really don't know if you will be eligible for a tax credit or not until after you have made the purchase.

I speak as someone who got a total tax credit of $0 for my 2008 Escape Hybrid.

 

Call me cynical, but it was no mistake - the AMT bracket creep is a back-door tax hike, giving the government increasing money without the congresscritter having to take the political grief of actually increasing the rate. Inflation has been the staple of increasing tax burdens since the income tax came into being.

And AMT has been hitting more people every year due to the bracket creep and ever-increasing state tax burden. And they haven't fixed the law 'cause there are no other chickens to pluck. And having the tax credits vanish into thin air is another 'marketing' deal where they can trumpet accomplishments without really doing anything.

 

It looks as if the newly enacted recovery/stimulus package has a significant "patch" for the AMT. They reckon it will only affect about 3-4 million taxpayers (it would have been 30 million with no action).

So, while there are fewer hybrid tax credits around, unless you fall into a significant exception, AMT will not apply to you. Congress has been trimming this monster for years now. I used to routined get stung by it. But in the last 4 years, it has not affected me, even though my family, deductions, and earnings situation has been stable.

This is good for me as I am ready to pull the trigger on either a NAH or FFH, each of which has a pretty nice credit (2350 and 3400 respectively).