TAX BENEFITS FOR HYBRIDS

Policy makers across Canada have identified hybrid vehicles as a technology that has the potential to reduce fuel consumption and greenhouse gas emissions from the transportation sector.  As a result, some provincial governments offer tax incentives for purchasing a hybrid. 

The following provinces offer a partial sales tax rebate for hybrid vehicles: 

• British Columbia
• Ontario
• Prince Edward Island
• Canada
• United States

British Columbia
For residents of British Columbia two different tax reduction benefits are available when a hybrid vehicle is purchased.

1. Reduction of Social Services Tax
A. Passenger Vehicles
The Provincial Government offers a point of sale reduction of the Social Services Tax (commonly known as the Provincial Sales Tax) on the purchase or lease of a hybrid electric or alternative fuel vehicle.

B.Shuttle Buses
A shuttle bus is considered a bus with a seating capacity of 14 to 29 passengers. The Provincial Government offers a partial rebate of the Social Services Tax for these vehicles.

Effective February 16,2006, Purchasers are entitled to the lesser of either:

• 50% of the tax paid on the purchase or lease of the vehicle;or
• $5,000

C. Passenger Buses
A passenger bus is considered a bus with a seating capacity of 30 or more passengers. The Provincial Government offers a partial rebate of the Social Services Tax for these vehicles.

Effective February 16,2006, Purchasers are entitled to the lesser of either:

• 50% of the tax paid on the purchase or lease of the vehicle;or
• $10,000

2. Tax Rate Reduction
This tax rate reduction is applicable only to hybrid vehicles that cost more than $49,000.

The social services tax rate applicable to a new or leased vehicle is a function of the price. Up to $49,000 the social services tax rate is 7.0%. At prices greater than $49,000 the social services tax rate increases for each $1000 increase in price up to a ceiling of $51,000.  At $51,000 the applicable tax rate is 10%.

Hybrid vehicles with a purchase price greater than $49,000 are eligible for a reduction in the applicable provincial tax rate. The applicable tax rate level is determined by subtracting a government determined factor of $7,000 from the purchase price of the vehicle. The tax rate is then applied to the full amount of the purchase price.

Here is a simple example of the possible tax savings:

Note: The motor vehicle dealer applies this lower tax rate at the time of purchase.

For complete information on tax benefits please see the Government of British Columbia's Bulletin SST 085, Alternative Fuel Vehicles and Alternative Motor Fuel Tax Concessions

Note: In order to receive your tax refund, you must submit an application. Download and complete the application form contained in RST Guide 702 - Vehicles Powered by Alternative Fuels.

Prince Edward Island
Partial Rebate of HST
Prince Edward Island offers a partial rebate of the Provincial Sales Tax (PST) with the purchase or lease of a hybrid electric vehicle. Vehicles purchased after March 30, 2004 are eligible for a rebate of up to $3,000 of the paid PST.

Note: In order to receive your tax refund, you must submit an application. Download and complete the application form, Request for Refund of Revenue Tax (PST)

Government of Canada

The Government of Canada, under its EcoAuto program, offers Canadian residents incentives for the purchase of a new hybrid vehicle.

Note: In order to receive an incentive you must qualify and submit an application.

United States
In the United States, the Federal Government as well as many State Governments offers tax incentives for Hybrid Vehicles.

The U.S. Department of Energy provides a detailed breakdown of financial incentives by state.