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IRS Certifies Ford Hybrids For Tax Deduction

December 1, 2005

The Internal Revenue Service (IRS) has certified Ford Motor Company’s model year 2006 Ford Escape and Mercury Mariner Hybrids as being eligible for the clean-burning fuel deduction, according to AutoChannel.com. The certification means that customers who purchased either SUV during the 2005 calendar year may claim a tax deduction of up to $2,000 on their 1040 Form.The Escape and Mariner Hybrids join a short list of clean-fuel vehicles, which includes the 2005 Ford Escape Hybrid and six other vehicles from Lexus, Toyota and Honda that have been certified by the IRS.According to the IRS, “Federal law allows individuals to claim a deduction for the incremental cost of buying a motor vehicle that is propelled by a clean burning fuel.” The amount of the deduction for the Escape and Mariner was established after Ford documented for the IRS the incremental cost related to the vehicles’ electric motor and related equipment.The one-time deduction must be taken in the year the vehicle was originally used, can only be taken by the original owner and does not apply to leased vehicles. Even if a taxpayer does not itemize deductions, the vehicles can still qualify as an adjustment to income on their 1040 Form. The actual amount of savings, however, depends on factors such as an individual’s tax bracket.The hybrid purchase deduction expires on Dec. 31, 2005 under Section 1348 of the Energy Act of 2005, and will be replaced by a tax credit starting in 2006.The only American automaker to produce hybrids, Ford currently produces 24,000 annually and has plans to have five hybrids on the road by 2008. The company also plans to increase its hybrid production to approximately 250,000 vehicles annually by 2010.
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