Park a clean-fuel deduction on ’05 return

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in Small Business Tax,Small Business Tax Deduction Strategies

What the tax law takes away with one hand, it often gives with the other. Case in point: The 2005 tax year is the final year in which you can take a tax deduction for certain environmentally sound vehicles. But that write-off has been replaced in tax year 2006 with a series of tax credits approved in last year’s energy law.  

Advice: Follow the “old” rules when claiming the $2,000 clean-fuel deduction for a qualified vehicle placed in service in 2005. To qualify, you must purchase the car new. The IRS allows you to take clean-fuel deductions for the following vehicles:

• Ford Escape Hybrid: model year 2006
• Mercury Mariner Hybrid: model year 2006
• Lexus RX 400h: model year 2006
• Ford Escape Hybrid: model year 2005
• Toyota Prius: model year 2005, 2006
• Toyota Highlander Hybrid: model year 2006
• Honda Insight: model year 2005
• Honda Civic Hybrid: model year 2005
• Honda Accord Hybrid: model year 2005

Logistics: To claim the deduction, put “Clean-Fuel” and the deduction amount on the dotted line alongside Line 36 of your 1040

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