PROTECT THE ENVIRONMENT AND GET A TAX DEDUCTION TOO!

Submitted by Martha Matthews, Senior Tax Specialist, IRS

If you are the original owner of a qualifying hybrid vehicle – one that combines an electric motor with a gasoline-powered engine – you may be eligible to claim a one-time Clean Fuel tax deduction on your federal income tax return.  The deduction amount is limited to $2,000 for cars first put into use in 2004 and 2005.  The deduction will be limited to $500 for vehicles placed in service in 2006 and no deduction will be allowed after that year.

 

The following vehicles have been certified to qualify for this deduction:

 

• Toyota Prius – Model Years 2001 through 2005
• Honda Insight – Model Years 2000 through 2005
• Honda Civic Hybrid – Model Years 2003 and 2005
• Honda Accord Hybrid – Model Year 2005
• Ford Escape Hybrid – Model Year 2005
• Lexus RX 400h – Model Year 2006
• Toyota Highlander Hybrid – Model Year 2006

The deduction must be taken for the year in which the vehicle was first used (regardless of the model year).  This deduction is taken as an adjustment to income (Line 35 for 2004).  You do not have to itemize deductions on your tax return to claim it, but you do have to use Form 1040.  Hybrid vehicles do not have to be owned or used by businesses to qualify for the deduction.  Individual taxpayers may also take this deduction.  For more information on the Clean Fuel deduction, go to www.irs.gov and download Publication 535, Business Expenses, or order free copy by calling toll free 1-800-829-3676.