Hybrid cars and Federal Income Tax Reductions

Hybrid cars such as the Toyota Prius, Honda Civic Hybrid, and possibly the Ford Escape Hybrid qualify for a one-time federal income tax deduction of up to $2,000.

Consumers that purchase one of these hybrids in 2005 can utilize the Clean Fuel tax deduction on line 32 of your 1040 tax form.

Unfortunately, this deduction will be reduced to $500 in 2006, and this tax credit is scheduled to be phased out completely in 2007 under current legislation.

At this time, I have not obtained proof that the Honda Accord Hybrid qualifies for this credit.

Additionally, I do not know whether the Lexus RX400h Hybrid or the Toyota Highlander Hybrid, due out later in 2005, will qualify for this tax credit. If; however, the Ford Escape Hybrid qualifies, then I would assume the Highlander might also qualify.

I would be surprised and delighted, but not shocked, if the RX400h hybrid qualifies.

Join the Hybrid Car Club to stay informed about this issue.