Deductions for Clean-Fuel Vehicles and Refueling Property

Summary

A limited deduction for the cost of a clean-fuel vehicle is available to individuals and businesses in the tax year the property is placed in service. The vehicle must be for your own use and its original use must begin with you. The maximum amount of the deduction is $2,000 for cars and smaller vehicles, and 5,000 or $50,000 for trucks or vans meeting certain size requirements. The IRS also allows a limited deduction for the cost of clean-fuel vehicle refueling property. The maximum deduction you can claim for clean-fuel vehicle refueling property placed in service at one location is $100,000. The maximum clean-fuel vehicle deduction was scheduled to be 25% lower for 2002 and was scheduled for phase-out completely by 2005. The phase-out of the deduction will begin in 2004, and no deduction will be allowed for property placed in service after 2006. There is also an electric vehicle tax credit that is available. For more information on the electric vehicle tax credit, see Form 8834. You can take the deduction for clean-fuel vehicle property regardless of whether you use the vehicle in a trade or business. However, you can take a deduction for clean-fuel vehicle refueling property only if you use the property in your trade or business. You cannot claim these deductions for the part of the property's cost you claim as a section 179 deduction, see Publication 946. Clean-fuel vehicle refueling property is any property, other than a building, used to store or dispense clean-burning fuel into the fuel tank of a motor vehicle or used to recharge motor vehicles propelled by electricity. Recharging property includes any equipment used to provide electricity to the battery of a motor vehicle propelled by electricity. It includes low-voltage recharging equipment, high-voltage (quick) charging equipment, and ancillary connection equipment such as inductive charging equipment. It does not include property used to generate electricity, such as solar panels or windmills, and does not include the battery used in the vehicle. For more information, see IRS Publication 535, Chapter 12. Individuals and businesses can claim the deduction on Form 1040. The IRS general web site listed below under "Contact" provides a "Forms and Publications Finder." Enter the form or publication name or number that you are interested in, and click on "GO" to receive the requested form or publication.