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With the recent push by President Bush for alternative fuel strategies, much confusion has arisen regarding tax incentives for hybrid vehicles. This article clarifies the i ue for you.

Tax Deductio for Your 2005 Hybrid Automobile

People buy hybrid vehicles for different reason. They are good for the environment. They get much better mileage, which saves money. There are tax incentives for buying them. With the recent energy plan put in place by the federal government, there is a lot of confusion regarding the tax incentives.

ecifically, the question for most people is whether they can claim a tax deduction or a tax credit when they buy a hybrid. Here is the breakdown:

The Good If you purchased a hybrid vehicle in 2005, you can claim a tax deduction.

The Bad If you purchased a hybrid vehicle in 2005, you ca ot claim a tax credit.

The Ugly If you had waited till 2006, you could have claimed a tax credit.

Tax credits save you a lot more money than tax deductio . Tax deductio are a lied to your gro income like any other deduction. This hel lower your tax bill, nonetheless tax credits are much more powerful. Tax credits are not taken out of your gro income. I tead, tax credits are taken out of the exact amount of tax you owe the government. If you owe the government $10,000 after filling out your tax return and can claim a $2,000 tax credit, your final tax bill is $8,000.

You are stuck with a tax deduction tax deduction if you purchased a hybrid in 2005, nonetheless at least it’s a nice one. The deduction amount is $2,000 for vehicles certified by the IRS. They include:

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 in term of 2006

Toyota Highlander Hybrid: Model Year 2006

Honda I ight: Model Years 2000 in term of 2005

Honda Civic Hybrid: Model Years 2003 and 2005

Honda Accord Hybrid: Model Year 2005

To claim this deduction, you must have purchased a NEW hybrid. If the hybrid was employd, you get nothing. A uming it was new, the deduction is claimed on line 36 of the 1040 form. Make sure to write Clean Fuel in the ace lendd.