Tens of thousands of taxpayers have purchased hybrid electric vehicles this year, and the thousands more who plan to buy these gas-saving, environmentally-friendly vehicles in coming year will receive a bigger tax incentive than expected for their socially-responsible purchases, thanks to yesterday's action by the U.S. Congress on the middle class tax cut bill.
As part of that measure, Congress restored the alternative-fuel and hybrid vehicle federal income tax deduction to $2,000 for vehicles purchased in calendar years 2004 and 2005. (Under current law, the value of the deduction was to have been reduced by 25 percent, to $1,500 this year, and reduced by an additional 25 percent in 2005.) The value of the deduction in 2006 remains at only $500, as under current law, and the deduction continues to sunset entirely at the end of 2006.
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