The IRS previously certified the Toyota Prius for model years 2001, 2002 and 2003, as well as the Honda Insight for model years 2000, 2001 and 2002, and the Honda Civic Hybrid for model year 2003.

 

The amount of the deduction for the Prius was set after the manufacturer documented for the IRS the incremental cost related to the vehicle's electric motor and related equipment.

 

Under current law, the clean-burning fuel deduction will be reduced incrementally until it expires beginning 2007. Purchasers of IRS-certified cars will be able to claim a deduction of $2,000 if the vehicle is placed in service on or before Dec. 31, 2003. The $2,000 maximum deduction will be reduced by 25 percent for vehicles placed into service in 2004, by 50 percent in 2005 and by 75 percent in 2006. No deduction will be allowed for vehicles placed in service after Dec. 31, 2006.

 

The one-time deduction must be taken in the year the vehicle was originally used, and the taxpayer must be the original owner.

 

Individuals take this benefit as an adjustment to income on their Form 1040. They do not have to itemize deductions on their tax returns to claim it. To claim the deduction, write "clean fuel" on Line 33 of the 2003 Form 1040. Also, see the Instructions for Form 1040.