Thinking of Gifting Yourself or a Loved One With a New Car for the Holidays? Purchase an Energy-Efficient Vehicle and Drive Your Way to Tax Savings

PARSIPPANY, N.J., Jan. 5 — In the market for a new car? You may want to wait until after January 1, 2006 to make the purchase to take advantage of a significant tax credit. Jackson Hewitt Tax Service(R) (NYSE: JTX) explains how purchasing the latest hybrid or other fuel-efficient vehicle may provide the opportunity for taxpayers to receive an even greater tax savings on their 2006 tax return versus 2005.
"The Energy Policy Act of 2005, a new law that the President declared 'an unprecedented commitment to energy conservation and efficiency,' includes efficiency standards, research funding provisions and several incentives for taxpayers to invest in energy-conserving vehicles," said Mark Steber, Vice President of Tax Resources at Jackson Hewitt Tax Service. "The 'catch' here is that in order to reap these benefits, you might have to wait to purchase your new vehicle to claim the larger credit, but patience may prove to be a big tax-saver."
The Energy Policy Act encourages taxpayers who are shopping for a new car to consider a vehicle that utilizes new fuel-efficient technology. Qualified hybrid passenger automobiles and light trucks, which are generally vehicles that incorporate both an internal combustion or heat engine and a rechargeable energy storage system, offer a credit range from $400 to $3,400, depending on the fuel economy achieved.
Putting off that car purchase until 2006 can reap significant tax savings for taxpayers. For example, Silvia is single and makes $40,000 per year. If she purchases a qualified hybrid vehicle on November 25, 2005 she would be eligible for a tax deduction of $2,000, saving her $500 in taxes. However, if Silvia waits until 2006 to buy this vehicle, she would be eligible for a tax credit of $2,100, saving an additional $1,600 in taxes. This tax credit is based on a hybrid vehicle with a weight of approximately 3,000 pounds and a fuel efficiency rating of 60 miles per gallon in the city.
Qualified Fuel Cell Motor Vehicles (FCMVs), which are generally vehicles that use hydrogen as fuel, can generate a credit ranging from $8,000 to $44,000, depending on the weight of the vehicle and the fuel economy achieved. The higher credit amounts are provided for heavy trucks, such as semi-trucks and tractor-trailers. While FCMVs are not expected to reach the mass market before 2010, they are available as fleet vehicles in limited areas and may revolutionize on-road transportation when they become available to consumers as a mainstream vehicle.
Finally, a limited credit ranging from $5,000 to $40,000, based on gross weight and the additional "incremental" cost of the alternative fuel vehicle over a conventional gasoline-powered vehicle of the same model is available. Generally, these are alternative fuel vehicles that use compressed natural gas, liquefied natural gas, liquefied petroleum gas or any liquid fuel where at least 85 percent of its volume consists of methanol.
According to the American Council for an Energy Efficient Economy (ACEEE), the following vehicles may generate a tax credit based on the industry information available:

Current Fuel-Efficient Vehicles*

Make Model

Ford Escape Hybrid (two- or four-wheel drive)
Honda Accord Hybrid
Honda Civic Hybrid (auto or manual)
Honda Insight (auto)
Lexus RX 400h
Mercury Mariner Hybrid
Toyota Highlander Hybrid (two- or four-wheel drive)
Toyota Prius

Upcoming Models
(based on estimated specs)
Chevrolet/GMC Silverado/Sierra
Lexus GS 450h
Nissan Altima
Toyota Camry

* These vehicles are based on best-available information, which may
include 2005 model year data, manufacturer press statements or
specifications of similar models. Manufacturers are likely to alter
vehicles in the coming years to maximize the credits they earn.
"When considering an auto purchase it is important to note that traditional automobiles do not provide a tax credit or deduction, thus purchasing one of the alternative fuel vehicles is a great way to save on one's income tax," adds Steber. "Everyone's financial situation is unique, so it is important to speak with a tax professional to learn more about the implications to your income tax return filed in 2006 and 2007."
About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. (NYSE: JTX) is the second largest tax preparation service company in the United States, with over 5,400 franchised and company-owned offices in 49 states and the District of Columbia during the 2005 tax season. Specializing in electronic filing (IRS e-file), the Company provides full service, individual federal and state income tax preparation and facilitates related financial products. Most Jackson Hewitt offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey. More information about the Company may be obtained by visiting the Company's Web site at http://www.jacksonhewitt.com.
SOURCE Jackson Hewitt Tax Service Inc.

CONTACT:
Sheila Cort, Vice President, Corporate Communications,
+1-973-630-0680, Sheila.cort@jtax.com; or
Allison Jackson, Senior Manager, Communications,
+1-973-630-0681, allison.jackson@jtax.com,
both of Jackson Hewitt Tax Service Inc.