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Tax Break for Hybrid Powered Cars
The Break Can Save Purchasers up to $2,000
If you purchased a gasoline-electric hybrid auto in 2004, you can write
off $2,000 of the vehicle's cost. The IRS has deemed those vehicles
eligible for the clean-burning-fuel tax deduction. The deduction is
claimed directly on Form 1040. There is no form to fill out or income
thresholds to meet. Simply enter the amount on line 35 of your Form 1040
and write "Clean Fuel" on the adjacent dotted line.
This deduction is not new. It's been offered for the last few years to
owners of autos that operate on natural gas, liquefied natural gas,
liquefied petroleum gas, hydrogen, or any other fuel that's at least 85
percent alcohol. The IRS's certification of hybrid vehicles has simplified
and expanded the tax break. However, there are some requirements that must
be met. First, your auto must be one of the following vehicles:
• Toyota Prius model years 2001 through 2004;
• Honda Insight model years 2000 through 2004; or
• Honda Civic Hybrid model years 2003 and 2004.
Second, it's a one-time deduction allowed only in the year you bought the
car. And third, only the car's original purchaser can claim the tax break.
If you bought the car used, you do not qualify for the tax deduction.
Purchasers of fully electric autos may qualify for an even larger tax
break. If your new auto runs primarily on an electric motor powered by
rechargeable batteries, fuel cells, or other portable electric-current
sources, you may be eligible to claim a tax credit of ten percent of the
auto's cost, up to a maximum of $4,000. Tax credits reduce your tax
liability dollar for dollar, where a tax deduction reduces your overall
taxable income.
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