2005 Toyota Prius Certified for Clean-Fuel
Deduction;
New Law Restores Full Deduction Amount for 2004 and 2005
The Internal Revenue Service has certified the Toyota Prius for model year
2005 as being eligible for the clean-burning fuel deduction. The certification
means taxpayers who purchase this vehicle new may claim a tax deduction of
$2,000 on Form 1040.
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 the recently signed Working Families Tax Relief Act of 2004, the
clean-burning fuel deduction is up to $2,000 for certified vehicles first put
into service in 2004 and 2005. The deduction will be limited to $500 for
vehicles placed in service in 2006 and no deduction will be allowed after that
year.
The one-time deduction must be taken in the year the vehicle is originally
used. The taxpayer must be the original owner. Individuals take this benefit as
an adjustment to income on Form 1040. They do not have to itemize deductions on
their tax returns to claim it.
The amount of the deduction for the 2005 model year Prius was set after the
manufacturer, Toyota Motor Sales, U.S.A., Inc., documented for the IRS the
incremental cost related to the vehicle’s electric motor and related equipment.
The IRS previously certified the Toyota Prius for model years 2001, 2002,
2003 and 2004. The IRS also previously certified the Honda Insight for model
years 2000, 2001, 2002, 2003 and 2004 and the Honda Civic Hybrid for model years
2003 and 2004.
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