Tax Tips
Hybrid Cars Save Taxes and Gas
If you bought a gas-thrifty hybrid in 2005, it's time to claim your reward.
By Kevin McCormally, Editorial Director, Kiplinger.com
February 13, 2006
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As gas prices soared in 2005, Americans bought about 212,000 gasoline/electric hybrid vehciles, according to J.D. Power & Associates -- versus just 88,000 sold in 2004. Were you among the growing throng of buyers of such models as the Toyota Prius, Honda Insight, Honda Civic Hybrid and Ford Escape Hybrid SUV? If so, get ready to cash in on the government's reward.
The special deduction for buying a hybrid in 2005 is $2,000. And you get this tax break even if you don't itemize deductions. Folks who buy hybrids this year get an even more valuable tax credit, but don't be jealous.
Unfortunately, the IRS still hasn't found room on the 1040 to give this deduction it's own line. But you can claim your tax savings on line 36 of the Form 1040. That appears to be the place to total all the deductions listed above it, but you should just write "clean fuel" on the line and include your $2,000 deduction in your total.
If you're in the 25% bracket, the credit will save you $500 which, considering your great mileage, will take you a long way.