If you are environmentally conscious and purchase a 2005 Ford
Escape Hybrid vehicle that combines a gasoline-powered engine
with alternative power methods, you are in line for a nice tax
deduction.
Ostensibly, the government uses clean power tax deductions as a
method to promote the use of vehicles that are less harmful to
the environment. The clean-fuel tax deduction is based on the
incremental cost of using a vehicle model that combines
traditional gasoline-powered engines with electric motors. The
deduction is only available if the manufacturer has submitted
vehicle specifications that the IRS has agreed to qualify the
vehicle as a "Clean-Fuel Vehicle". Once this has occurred, the
IRS then certifies the vehicle as one that qualifies an owner
for a tax deduction.
On December 13, 2004, the IRS certified the 2005 Ford Escape
Hybrid as a "Clean-Fuel Vehicle" for the first time. If you
purchased the Ford Escape in 2004 or 2005, you may claim a tax
deduction of $2,000. You must comply with two requirements
before claiming the deduction. Under current law, you must:
1. Take the deduction in the year the vehicle was originally
purchased,and
2. Be the original owner, of the vehicle.
Importantly, you do not have to itemize your deductions to take
advantage of the Clean-Fuel deduction. If you are using the
basic 1040 form for filing your taxes, simply write "clean fuel"
on line 33 and take the deduction. Make sure you review the
instructions for form 1040 to correctly claim the deduction. The
process is exceedingly simple.
It should be noted that the Clean-Fuel Vehicle deduction is a
one-time deduction. Further, the deduction is only available on
your federal tax return, not your state filing. Since the
deduction will affect your adjusted gross income, however, you
should see an additional saving on your state tax return since
your adjusted gross income will be reduced. If you have already
filed taxes for the year in which you purchased a clean-fuel
vehicle, you should consider amending your tax returns to claim
the deduction.
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