updated 2/9/2007 10:47:59 AM ET 2007-02-09T15:47:59

The Internal Revenue Service said Wednesday that hybrid cars made by General Motors Corp, are still eligible for a tax credit intended to encourage buying the fuel-efficient cars because the company has not yet hit a legal cap on the credit.

The federal tax credit for new hybrid vehicles begins to phase out after a car maker has sold 60,000 hybrid or other fuel-efficient vehicles.

GM has sold more than 5,500 hybrid trucks and SUVs made by Chevrolet, Saturn and GMC since the credit started last year, with more than 3,300 sold in the fourth quarter of 2006, the IRS said.

The 2005 federal energy bill provided up to $3,600 in tax credits to U.S. consumers who buy hybrids.

Toyota Motor Corp., which makes hybrids under the Toyota and Lexus brands, hit the tax credit limit last summer and is the only automaker to do so far.

So far, Toyota has sold more than 212,000 hybrid Lexus and Toyota cars and SUVs since the credit began with nearly 68,000 during the fourth quarter of 2006, the IRS said.

While buyers of Toyota and Lexus hybrids since last October can still claim the tax credit, the amount they can receive has been cut in half. Beginning in April, that credit will be reduced to 25 percent of the full level and will be eliminated effective in October, the IRS said.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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