CLEAN-FUEL VEHICLE DEDUCTION


J

John H. Fisher

IR-2004-16, Jan. 29, 2004

MORE HONDA VEHICLES CERTIFIED FOR CLEAN-FUEL VEHICLE DEDUCTION

WASHINGTON - The Internal Revenue Service has certified the Honda Insight,
Model Years 2003 and 2004, and the Honda Civic Hybrid, Model Year 2004, as
being eligible for the clean-fuel vehicle deduction.

The certification means taxpayers who purchase any of these new hybrid
vehicles may claim a tax deduction of up to $2,000 for tax year 2003 or up
to $1,500 for tax year 2004.

Federal tax law allows individuals to claim a deduction for the
incremental cost of buying a motor vehicle that is propelled by a
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.

Under current law, the clean-fuel vehicle deduction will be reduced
incrementally until it expires beginning in 2007. Purchasers of
IRS-certified cars will be able to claim a deduction of $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 percent for vehicles placed into
service in 2004, by 50 percent in 2005 and by 75 percent in 2006. No
deduction will be allowed for vehicles placed in service after Dec. 31,
2006.

Under the law, the one-time deduction must be taken in the year the
vehicle was originally used. The taxpayer must be the original owner.
Individuals take this benefit as an adjustment to income on their Form
1040. They do not have to itemize deductions on their tax returns to claim

it. To claim the deduction, write "clean fuel" on Line 33 of the 2003 Form
1040. Also, see the Instructions for Form 1040.

The amount of the deduction for the Insight or Civic Hybrid was set after
the manufacturer, American Honda Motor Co. Inc., documented for the IRS
the incremental cost related to the vehicle's electric motor and related
equipment.

The IRS also previously certified the Honda Insight for model years 2000,
2001 and 2002 and the Honda Civic Hybrid for model year 2003.

"Jack" - John H. Fisher - (e-mail address removed)
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=:)
 
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