Clean-fuel Vehicles[NOTE]

"Hybrid" / Clean-fuel vehicles: The clean-burning fuel deduction applies to vehicles propelled by clean-burning fuel such as natural gas or electricity. Because this is an above-the-line deduction for Federal tax purposes, the deduction may be claimed on this line of the IA 1040.

The Internal Revenue Service certifies whether or not a vehicle qualifies for the deduction. In order for a vehicle to be eligible for the deduction, it must:

be acquired by the taxpayer for original use rather than for resale,
meet specified Federal and state emission standards,
be manufactured for public road/highway use,
have a minimum of four wheels, and
not operate exclusively on rails

The deduction is $2,000 for qualifying vehicles first used in the 2003 calendar year. The deduction decreases to $1,500 for 2004, to $1,000 in 2005 and to $500 in 2006. Federal law currently provides no deduction for hybrid vehicles first used after 2006.

The Toyota Prius, Honda Insight and hybrid Honda Civic have been approved. Others may be approved in the future. Contact the Internal Revenue Service for a current list of qualifying vehicles. Call the IRS at 1-800-829-1040.

Other "clean fuel deductions" allowed on the Federal 1040, line 33, will also be allowed on the IA 1040, line 24.

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