The Internal Revenue Service has certified the 2006 model year Lexus Rx 400h for a clean-burning fuel deduction. This certification means that taxpayers who purchase a new Rx 400h during calendar year 2005 may claim a tax deduction of up to $2,000 on Form 1040.
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 or is a certified hybrid.
Under the Working Families Relief Act of 2004, the clean-burning fuel deduction is limited to up to $2,000 for certified vehicles first put into service in 2005 and $500 for vehicles placed in service in 2006. Currently, no tax deduction will be allowed by the IRS after 2006.
This is a one-time deduction is for purchasers only and must be taken in the year the vehicle is put into service. The IRS does not allow the deduction for lessees.
Other hybrids qualified for the federal deduction are:
Ford Escape Hybrid — Model Year 2005
Toyota Prius — Model Years 2001 through 2005
Honda Insight — Model Years 2000 through 2005
Honda Civic Hybrid — Model Years 2003 and 2005
Honda Accord Hybrid — Model Year 2005
Many states offer additional tax incentives for hybrid vehicles, and buyers should check for specific information regarding possible state tax incentives.