Tax Deductions for Your 2005 Hybrid Automobile

Author: Richard A. Chapo

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 issue for you.

Tax Deductions 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.

Specifically, 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 cannot
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 deductions. Tax
deductions are applied to your gross income like any other
deduction. This helps lower your tax bill, but tax credits are
much more powerful. Tax credits are not taken out of your gross
income. Instead, 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, but at least it is 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 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

To claim this deduction, you must have purchased a NEW hybrid.
If the hybrid was used, you get nothing. Assuming it was new,
the deduction is claimed on line 36 of the 1040 form. Make sure
to write Clean Fuel in the space provided.

About the author:
Richard A. Chapo is with BusinessTaxRecovery.com - providing
information on
<a href="http://www.businesstaxrecovery.com">tax
and taxes</a>.
Visit us to read more
<a href="http://www.businesstaxrecovery.com/articles">tax
articles</a> and our new
<a href="http://www.businesstaxrecovery.com/tax_credits">tax
credits</a> page.