Hybrid Cars and Vehicles

If you buy a new hybrid car, you could be eligible for a one-time federal income tax deduction of as much as $2,000. Several models of hybrid car placed in service by the end of 2005 are eligible for a clean fuel deduction of $2,000. Those put in use during 2006 could be eligible for a $500 federal income tax deduction. Under current legislation vehicles purchased after 2006 will not be eligible for a deduction. If you purchased a hybrid car before 2005, you can submit a claim for the deduction by filing an amended tax return for the tax year in which the vehicle was purchased. The following requirements must be met for your hybrid car to qualify: * You must purchase the car new and for your own use. Cars purchased for resale do not qualify. * You must drive the vehicle "mostly" in the United States. * The vehicle must meet all federal as well as state emmissions requirements. * Government agencies, tax exempt organizations, and foreign entities are not eligible for the deduction. * If any of the above conditions change within three years of the vehicle purchase, you may be required to return some of the money saved by the deduction. The following vehicles currently qualify for the deduction. Other hybrids may be approved at a later date: 2005 Ford Escape Hybrid 2005 Honda Accord Hybrid 2003-2005 Honda Civic Hybrid 2000-2005 Honda Insight 2001-2005 Toyota Prius Whether you itemize or take the standard deduction doesn't matter. Either way, you can still claim the clean-fuel tax deduction. Simply include the deduction for your hybrid car on your 1040 form in the "Tax, Credits, and Payments" section. Enter the appropriate amount of the deduction you are claiming and the words "Clean Fuel" in the space to the left of the block for line 35 and include the deduction for your hybrid car in the total.