If you purchased a new hybrid vehicle and placed it in service by December 31, 2005, you may be eligible for a tax deduction of $2,000. Hybrid vehicles which are placed in service after December 31, 2005, will no longer be eligible for the $2,000 deduction but still may be eligible for a federal income tax credit under new legislation. The new amount will depend upon a number of different factors such as the vehicle’s fuel economy and the vehicle’s estimated fuel savings.
The following hybrid vehicles which may be eligible for a “clean fuel” deduction of $2,000:
Lexus RX 400h — Model Year 2006
Ford Escape Hybrid — Model Year 2005
Toyota Prius — Model Years 2001 through 2005
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
For those that purchased a hybrid vehicle before 2005, you may be able to claim the deduction by filing an amended tax return for the tax year in which the vehicle was purchased.
In order for the hybrid vehicle to qualify for this deduction it must meet the following requirements:
The vehicle must be purchased new and for your own use, not for resale.
The vehicle must be driven mostly in the United States.
The vehicle must meet all federal and state emissions requirements.
If the vehicle is purchased for use by government agencies, tax exempt organizations, or foreign entities, it’s not eligible.
Other requirements may also apply.
For more information you can visit the IRS website