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Tax Tip of the Week
For the week of
July 29, 2002

Reduce pollution and reduce your taxes too

Now you can help the environment and cut your taxes too. A recent IRS announcement provides new information about a tax deduction for hybrid cars — vehicles that combine an electric motor with a small gasoline engine. In recent years several manufacturers have introduced models of these hybrid vehicles, which offer greatly improved fuel consumption and lower emissions than traditional autos.

If you buy one of these vehicles, you can claim a special tax deduction based on the cost of the electric motor and related components. This tax break amounts to a one-time deduction of up to $2,000 in the year you buy the vehicle. After 2003, the full deduction begins to phase out. It's not available after 2006.

In the coming months, the IRS will announce the exact deduction for each make of vehicle. You don't need to itemize deductions in order to benefit. The new deduction will be a direct reduction of your taxable income.

There's more good news if you're one of those innovative spirits who has already bought a hybrid car. The deduction is retroactive. To claim the deduction on a previously filed return, you can file an amended return for any of the last three years.

If you have any questions about this deduction or would like assistance with amending a prior-year tax return, please call.

Prior Tax TipsClick here to view previous tax tips.

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