The tax saver for buyers of fuel-saving hybrid vehicles was scheduled to shrink from a $2,000 deduction to $1,500 in 2004. But at the last minute, Congress restored the higher amount. Unfortunately, the IRS still hasn't found room on the Form 1040 to give this deduction its own line. If you bought a qualifying vehicle--including the Ford Escape Hybrid, the Honda Civic Hybrid or Insight Hybrid or the Toyota Prius--claim your tax savings on line 35, which appears to be simply a place to total the deductions listed above it.

Also, be aware, under newly published IRS regs, you can:

New for 2004, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). You cannot deduct both. Generally, to figure your state and local general sales tax deduction, you can use either your actual expenses or the Optional State Sales Tax Tables contained at:

http://www.irs.gov/publications/p600/index.html

Actual expenses. Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2004 only if the tax rate was the same as the general sales tax rate. Do not include sales taxes paid on items used in your trade or business.

Rate less than general rate. Sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate.

Rate more than general rate. Sales taxes on motor vehicles also are deductible as a general sales tax if the tax rate was more than the general sales tax rate, but the tax is deductible only up to the amount of tax that would have been imposed at the general sales tax rate. Motor vehicles include:

Cars
Motorcycles,
Motor homes,
Recreational vehicles,
Sport utility vehicles,
Trucks,
Vans, and
Off-road vehicles
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In my case I will deduct my sales tax (CA) of 7.75% (about $2500) plus the IRS Table for my income and family size (about $1000) for a total of $3500 which is more than my state income tax deduction. In addition, I will take the Hybrid deduction of $2000.

Mike

Mike Maline - Sdctcher
2005 Ford Escape Hybrid Owner
California School Teacher

*stuck*

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If you do the walk through in Turbotax, you will be prompted about vehicle purchases in 2004 and then asked questions about qualifying vehicles. There are two different tax advantages listed: one for electric cars and one for clean fuel vehicles. The Prius and other hybrids qualify as clean fuel vehicles. Be looking out for that when you are answering the Turbotax questions. The program will take care of the rest.

It has been said:
Hybrid drivers come in 3 flavors, greenie, techie and cheapie. Pick any 2.
2005 Prius, Melinium Silver over gray, package 5 (AI)

My wife is the one who does our Turbo Taxes, we've filed last night.
I paid about $18,500 for my HCH, now it's like I've only paid $16,500, plus the $5,000 in fuel I've saved over the car it replaced.

This is nice.

Efficient drivers do it better.
1003 miles a tank personal record. 74MPG calculated. HCH1 CVT

Hi Hot_Georgia_2004:

___Well, $2,000 was a bit of a stretch. It is a deduction, not a credit. Do take your family on a nice vacation with the $300 - $720 saved though

___Good Luck

___Wayne R. Gerdes
___Hunt Club Farms Landscaping Ltd.
___Waynegerdes@earthlink.net

I'm not sure.
I asked my wife about the actual cash value of the deduction and she said $2,000.
She used Turbo Tax (Premire I think it is) and the program didn't find any errors with the return and the Fed's accepted it.

Efficient drivers do it better.
1003 miles a tank personal record. 74MPG calculated. HCH1 CVT

Hi Hot_Georgia_2004:

___Yes, it is a $2,000 deduction, not a credit. This $2,000 is multiplied by your tax bracket and removed from your total tax at the end just as your real estate taxes and mortgage interest are.

___Good Luck

___Wayne R. Gerdes
___Hunt Club Farms Landscaping Ltd.
___Waynegerdes@earthlink.net

Make sure she didn't take the alternative fuel tax credit. I think there are two seperate things going on in the taxes.

1) There is a tax CREDIT for alternative fuel/electric vehicles (pure electric not hybrid)

2) There is a DEDUCTION for a newly purchased hybrid vehicle.

You can only use option 2 for hybrids. I believe in a post earlier someone mentioned that the government kept the deduction at the levels it was last year which I think was a $2000 DEDUCTION. And I believe it was mentioned that the IRS didn't update the forms so you have to write it in on a line.

So if she is using Turbo Tax make sure she did it right. The program won't stop you from putting in the credit. It doesn't know what car you bought. So it won't report any errors.

This goes back to my post earlier. In TurboTax, don't take the electric vehicle credit, take the clean-fuel vehicle deduction. The software will ask a series of questions about the vehicle you purchased, then ask you what exact vehicle you purchased and then it will place the 2000 deduction on the form. When printed, toward the bottom of page 1 of the 1040 there will be typing on I think it is line 35 which will say "clean-fuel" and the $2000 will be entered. You are not required to itemize to take this deduction, it is considered "on sheet", that is why it is on line 35, which is kind of a Misc. deduction area of the 1040. The $2000 is treated by the tax form as a reduction of income, not a reduction of tax, i.e. a deduction.

It has been said:
Hybrid drivers come in 3 flavors, greenie, techie and cheapie. Pick any 2.
2005 Prius, Melinium Silver over gray, package 5 (AI)

Hmmmmmm...........

Efficient drivers do it better.
1003 miles a tank personal record. 74MPG calculated. HCH1 CVT