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A relatively new IRS Code
Sec. 179A
allows taxpayers to claim a deduction
for the incremental cost of buying a motor vehicle that is propelled by
clean-burning fuel. By combining an electric motor with a
gasoline-powered engine, these hybrid vehicles obtain greater fuel
efficiency and produce fewer emissions than similar vehicles powered
solely by conventional gasoline-powered engines. IR 2003-114
(October, 2003) states that buyers of a model year 2004 Toyota Prius
bought and placed in service last year may claim a deduction of up to
$2,000 for the 2003 tax year. If the vehicle is placed in service
in 2004; this amount is reduced by 25%.
The IRS has certified more
Honda hybrid gas-electric automobiles as being eligible for the Code
Sec. 179A clean-burning fuel deduction. The IRS previously
certified the 2000 to 2002 Honda Insight, and the Honda Civic Hybrid for
2003. Now, the IRS has certified the Purchasers of the Honda
Insight, model years 2003 and 2004, and Honda Civic Hybrid, model year
2004, may claim a tax deduction of up to $2,000 for tax year 2003 or up
to $1,500 for tax year 2004. These deductions are eligible in the year
that the purchaser first put the vehicle to use.
Purchasers of IRS-certified
cars will be able to claim a deduction of up to $2,000 if the vehicle
was placed in service on or before Dec. 31. 2003. The $2,000 maximum
deduction will be reduced by 25% for vehicles placed in service in 2004,
by 50% in 2005, and by 75% in 2006. No deduction will be allowed for
these vehicles placed in service after Dec. 31, 2006.
The deduction must be taken
in the year the vehicle was originally used. The taxpayer must be the
original owner. Leased vehicles do NOT qualify for the
deduction. The deduction is claimed as an adjustment to income.
Taxpayers do NOT need to itemize to get it.
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