Did you buy a clean-fuel car this year? Wondering how to turn your purchase into a tax deduction? If you purchased a new clean-fuel vehicle before the end of 2003, you may be eligible for a tax deduction of up to $2,000. For new electric vehicles, the deduction could be $4000. Read on. We know: All About Clean Fuel Tax Deductions1. How many deductions or incentives are there?Two. One can be used for any Clean-Fuel Vehicle, except an electric car. The other is for electric cars. 2. What’s a Clean-Fuel Vehicle?The U.S. tax code defines "clean-fuel" vehicles as motor vehicles designed to be propelled by one of the following fuels:
3. How do I claim the deduction for a clean-fuel vehicle? (For electric vehicles, see #4 below.)Include the deduction on line 32 of your 1040 tax form in the "Adjusted Gross Income" section. Enter the amount of the deduction and the words "Clean Fuel" on the dotted line next to line 32. If you bought your vehicle before 2003, simply file an amended return for the tax year in which you bought the car. 4. Must I itemize to claim the deduction?Nope. You can claim the deduction whether you itemize, or take the standard deduction. 5. How do I claim a deduction for an electric vehicle?Electric vehicles purchased new are eligible for a credit of 10% of the vehicle cost up to $4,000 per vehicle. To claim the deduction, you must fill out Form 8834: Qualified Electric Vehicle Credit. If you bought your vehicle before 2003, simply file an amended return for the tax year in which you bought the car. 6. How long will these 2 tax incentives be around?They’re both scheduled to phase out between 2004 and 2006. 7. Don't forget to check and see if your state also offers tax incentives for clean-fuel cars. | |||||
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