Honda Hybrid Tax Credit to Phase Out

Honda is the second automaker to hit a limit of 60,000 hybrid vehicles that qualify for the credit, which is designed to encourage sales of the fuel-efficient cars. Toyota Motor Corp. hit the limit last year, while Honda did so this fall, the IRS said.

Customers who buy a Honda hybrid before the end of 2007 will still be eligible for the full tax credit. In the first half of next year, buyers of Honda hybrids will be able to claim only 50 percent of the original tax credit, or $650 for Honda Accord hybrids and $1,050 for Honda Civic models.

After July 1, the credit will be cut to $325 for the Accord models and $525 for the Civic, the IRS said.

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.

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