Tax credits can reduce premium you pay for hybrid vehicle

Back when gas cost $1.50 a gallon, folks who wanted to impress their neighbors bought luxury cars with lots of horsepower and wide leather seats.

Now that gas is selling for close to $3 a gallon on average nationwide, trendsetters are buying hybrids. "Purrs like a kitten and gets 58 miles per gallon in the city," Mr. Jones says as he lovingly waxes the Prius in his driveway. "Plenty of legroom, too."

What Mr. Jones probably won't tell his buddies is that he paid a premium for his hybrid. The most popular hybrids cost about $3,000 more than comparable gas-powered models. Even with the increase in gas prices, you'd have to drive a lot of miles to offset the higher price tag. But you can reduce the hybrid premium by taking advantage of all the tax credits available to you. story continued