Hybrid Electric Vehicles, 2004/2005 Federal Tax Deduction

Can I get a tax deduction for my HEV?YES. The Federal Clean-Fuel Vehicle property tax deduction can be claimed for qualifying hybrid electric vehicles(HEVs). The deduction applies to both personal and business vehicles. To qualify for the Clean-Fuel Vehicle taxdeduction, vehicles must be certified by the Internal Revenue Service (IRS) as being eligible for the deduction.How much can I deduct for my HEV?Owners of certified vehicles can claim a one-time deduction of $2,000 for the year the vehicle is first used, if thatyear is before 2006. In 2006 the deduction is scheduled to drop to $500.What other requirements are there for claiming the deduction?You must purchase the vehicle new and for your own use (not for resale) and drive it mostly in the United States.The deduction cannot be claimed by government agencies, tax-exempt organizations, or foreign entities.Where on my tax form do I put the HEV deduction?For the 2004 and 2005 tax years, the tax deduction is taken as an adjustment to income on IRS form 1040 in the “Adjusted Gross Income” section. For the 2004 tax year, enter the amount of the deduction and the words “CleanFuel” on line 35. You can claim it whether you itemize or take the standard deduction. For vehicles purchasedsolely for business use, claim the deduction on the “other expenses” line of Schedule C (1040) or Schedule F (1040).Will HEVs be eligible for tax deductions in the future?The deduction will remain at $2,000 for tax year 2005. In 2006, the deduction is scheduled to drop to $500. After 2006, the IRS does not expect to allow a deduction.