Feb
21

$2,000 Tax Deduction For Clean-Fuel Vehicle Credit

Filed Under Clean Fuel Vehicle Credit, Tax Deductions, Tax Returns 

$2,000 Tax Deduction
The certification means taxpayers who purchase any of these new hybrid vehicles may claim a tax deduction of up to $2,000 for tax year 2005.

(The deduction started off as $2,000 in tax year 2002 and reduced to $1,500 for tax year 2004 and raised again for 2005.)

You can claim a deduction for the incremental cost of buying a motor vehicle that is propelled by a clean-burning fuel - which typically refers to vehicles that are commonly known as “hybrids”.

By combining an electric motor with a gasoline-powered engine, these hybrid vehicles obtain greater fuel efficiency and produce fewer emissions than similar vehicles powered solely by conventional gasoline-powered engines.

How To Claim
You must use Form 1040, not one of the shorter forms, to claim this deduction.

You should put “Clean-Fuel” and the deduction amount on the dotted line to the left of line 35, including this amount in that line’s total adjustments to income.

(You would have used line 33 on the 2003 Form 1040; line 34 on the 2002 form; line 32 the previous two years.)

Claiming A Deduction For Earlier Years
Qualifying individuals who did not claim the deduction when they filed may claim it on an amended return (Form 1040X). Generally, taxpayers may amend returns up to three years from the original return’s due date.

Qualifying Vehicles
The IRS has certified the following vehicles as being eligible for the clean-fuel vehicle deduction:
Ford Escape Hybrid — Model Year 2006
Mercury Mariner Hybrid — Model Year 2006
Lexus RX 400h — Model Year 2006
Ford Escape Hybrid — Model Year 2005
Toyota Prius — Model Years 2001 through 2006
Toyota Highlander Hybrid — Model Year 2006
Honda Insight — Model Years 2000 through 2005
Honda Civic Hybrid — Model Years 2003 and 2005
Honda Accord Hybrid — Model Year 2005

Find out more about tax savings at www.taxassistonline.com

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