Can you explain the tax credits I might be entitled to if I buy a hybrid car?

Can you explain the tax credits I might be entitled to if I buy a hybrid car? Also, is it true that single-rider hybrids can now use HOV lanes in recognition of their fuel efficiency?

—Mark Timken, Greenwich, CT

If you’ve been wanting a hybrid gasoline-electric vehicle but have been reticent to shell out the extra bucks, 2006 just might be your year. Beginning this past January, in accordance with the new Energy Policy Act, the federal government began awarding unprecedented tax credits to consumers who go hybrid.

Hybrids are more expensive than conventional vehicles because of their costly batteries and because they have two separate engines under each hood. But the new tax credits go a long way toward closing that cost differential. Individuals who purchase any of the new gas-electric hybrids available in the U.S. between 2006-2007 are eligible for up to $3,400 in federal tax credits. The credits are limited to the first 60,000 hybrid vehicles sold by each automaker, though, limiting the savings to those who act early.

According to an analysis by the non-profit Union of Concerned Scientists, which runs the website, Toyota’s popular Prius model would typically qualify its buyer for a tax credit topping $3,100, while Honda’s Civic Hybrid would garner about $2,100. Buyers of the new hybrid SUVs from Ford, Toyota and Lexus could expect more than $2,000 in tax credits. The amounts of the credits are based on fuel economy improvements over conventional models of the same class of car or truck, so the hybrids offering the biggest boost in fuel efficiency will generate the largest tax credits for their owners.

And, yes, another component of the Energy Policy Act is the Federal Hybrid HOV Waiver, which allows states to open their high-occupancy vehicle (HOV) lanes to hybrids that get at least 50 percent better fuel efficiency in the city and 25 percent better in combined city-highway miles over conventional models, regardless of how many passengers are present. So far 12 states are participating and many others are sure to follow.

Beyond these new federal incentives, 36 states offer some kind of rebate, incentive or benefit to encourage consumers and businesses to go hybrid. New York Governor George Pataki recently unveiled a comprehensive energy reduction plan that includes a $2,000 state tax credit, discounted highway tolls and HOV-lane access for those who drive hybrids. If the state legislature approves Pataki’s plan, New York taxpayers who buy hybrids could save more than $5,400.

Even some businesses are voluntarily getting in on the act. Search engine giant Google is offering $5,000 to each employee toward the purchase of a new hybrid. And Travelers Insurance announced last month that it would start giving its auto insurance customers who drive hybrids a 10 percent discount.

Demand for hybrids is surging. Combined sales of the first hybrids in 1999 topped out at just a few hundred vehicles. In 2005, American car dealers sold more than 205,000 hybrid cars and SUVs. With all these new incentives in place, and a public more concerned than ever about the price of gas at the pump, automakers are planning to unveil many more hybrid models over the next few years. Whether or not they can keep up with demand is going to be anybody’s guess.