2004/2005 Federal Tax Deduction: Hybrid Electric Vehicles 

Can I also claim the electric vehicle tax 

credit for my HEV?

No. Because current hybrid vehicles are certified as being 

primarily gasoline powered, they are not eligible for the 

electric vehicle tax credit. To learn more about tax incentives 

for dedicated electric vehicles, see IRS form 8834 on the IRS 

website at www.irs.gov.

See IRS publication 535 for information on federal tax 

deductions for other clean fuel and alternative fuel vehicles.

Where can I find more information?

• Internal Revenue Service www.irs.gov or 1-800-829-1040

• National Alternative Fuels Hotline 800-423-1363 or 

 www.eere.energy.gov/afdc/resources/hotline.html

• Clean Cities Hybrid Electric Vehicles Web page 

 www.eere.energy.gov/cleancities/hev/

Disclaimer

The information on this page should not be viewed as an 

offi cial or legally binding document. Other requirements 

or exceptions may apply. For more detailed information, 

please consult an IRS tax representative and/or offi cial 

IRS publications (www.irs.gov).

Can I get a tax deduction for my HEV?

YES. The Federal Clean-Fuel Vehicle property tax deduction can be claimed for qualifying hybrid electric vehicles 

(HEVs). The deduction applies to both personal and business vehicles. To qualify for the Clean-Fuel Vehicle tax 

deduction, vehicles must be certified by the Internal 

Revenue Service (IRS) as being eligible for the deduction. 

How much can I deduct for my HEV?

Owners of certified vehicles can claim a one-time deduction of $2,000 for the year the vehicle is first used, if that 

year is before 2006. In 2006 the deduction is scheduled 

to drop to $500.

What other requirements are there 

for claiming the deduction?

You must purchase the vehicle new and for your own use 

(not for resale) and drive it mostly in the United States. 

The deduction cannot be claimed by government agencies, 

tax-exempt organizations, or foreign entities.

Where on my tax form do I put the HEV deduction?

For the 2004 and 2005 tax years, the tax deduction is taken 

as an adjustment to income on IRS form 1040 in the 

“Adjusted Gross Income” section. For the 2004 tax year, 

enter the amount of the deduction and the words “Clean 

Fuel” on line 35. You can claim it whether you itemize 

or take the standard deduction. For vehicles purchased 

solely for business use, claim the deduction on the “other 

expenses” line of Schedule C (1040) or Schedule F (1040).

What if I bought my car before 2004?

You can file an amended tax return (Form 1040X) to claim 

the deduction for the tax year in which you purchased the 

vehicle. Generally you can amend returns for up to three 

years from the original return’s due date.

Will HEVs be eligible for tax deductions 

in the future?

The deduction will remain at $2,000 for tax year 2005. 

In 2006, the deduction is scheduled to drop to $500. 

After 2006, the IRS does not expect to allow a deduction.

* The IRS continually certifies new HEV models. Check the IRS Web site at www.irs.gov for the 

latest information on qualified vehicles. 

2005 Available Light-duty HEVs*

Manufacturer Model IRS Certifi ed? Model Year

Ford Hybrid Escape Yes 2005

Toyota Prius Yes 2001-2005

Honda Civic Hybrid Yes 2003-2005

Honda Insight Yes 2000-2005

Honda Accord Hybrid Yes 2005

Fact Sheet April 2005
Clean Cities

For more information about Clean Cities visit www.eere.energy.gov/cleancities

Prepared by the National Renewable Energy Laboratory (NREL)

NREL is a U.S. Department of Energy National Laboratory

Operated by Midwest Research Institute • Battelle

Neither the United States government nor any agency thereof, nor any of their employees, 

makes any warranty, express or implied, or assumes any legal liability or responsibility for the 

accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein 

to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, 

or favoring by the United States government or any agency thereof. The views and opinions 

of authors expressed herein do not necessarily state or reflect those of the United States government or any agency thereof.

Printed with a renewable-source ink on paper containing at least 50% wastepaper, including 

20% postconsumer waste

Sponsored by the U.S. Department of Energy

Energy Efficiency and Renewable Energy 

Office of Weatherization and Intergovernmental Programs

For more information contact: EERE Information Center

www.eere.energy.gov

A Strong Energy Portfolio for a Strong America

Energy efficiency and clean, renewable energy will mean a stronger economy, 

a cleaner environment, and greater energy independence for America. Working 

with a wide array of state, community, industry, and university partners, the U.S. 

Department of Energy’s Office of Energy Efficiency and Renewable Energy invests 

in a diverse portfolio of energy technologies.

DOE/GO-102005-2125 • April 2005

State Incentives: Hybrid Electric Vehicles 

OR: A Business Energy Tax Credit is available for the 

incremental cost of purchasing HEVs. The tax credit is 

35% of the incremental cost of the system or equipment 

and is taken over five years. A Residential Tax Credit of 

up to $1,500 is available for the incremental cost of a HEV. 

For more information visit the Oregon Department of 

Revenue at egov.oregon.gov/DOR/.

PA: The purchase of a HEV is eligible for funding under the 

Alternative Fuels Incentive Grant Program; funding amounts 

vary. For more information visit the Pennsylvania Alternative Fuels Incentive Grant program at www.dep.state.pa.us/ 

dep/deputate/pollprev/AFIG/afvafig1.htm.

UT: Utah allows a credit for 50%of the incremental cost 

($3,000 maximum) of a Honda Civic HEV. 

VT: Businesses in Vermont that are involved exclusively in 

designing, developing, and manufacturing electric vehicles, 

AFVs, or HEVs are eligible for certain income tax credits. 

For more information, visit the Vermont Department of 

Taxes at www.state.vt.us/tax/index.shtml.

VA: AFVs displaying the Virginia “Clean Special Fuels” 

license plate can use the Virginia HOV lanes, regardless 

of the number of occupants, until July 1, 2006. The Toyota 

Prius, and Honda Insight and Civic HEVs qualify. For

more information, visit the Virginia Department of Motor 

Vehicles at www.dmv.state.va.us/webdoc/citizen/vehicles/

cleanspecialfuel.asp.

WA: Effective June 13, 2002, HEVs that obtain a rating by 

the U.S. EPA of at least 50 miles per gallon during city 

driving are exempt from emissions control inspections.

Where can I find more information?

• Clean Cities Hybrid Electric Vehicles Web page 

www.eere.energy.gov/cleancities/hev/

• National Alternative Fuels Hotline 800-423-1363 or 

www.eere.energy.gov/afdc/resources/hotline.html

• Alternative Fuels Data Center State Laws and

Incentives Web page www.eere.energy.gov/afdc/laws/ 

incen_laws.html 

CO: An income tax credit is available from the Colorado 

Department of Revenue for the incremental cost of purchasing an HEV. To learn more, visit the Colorado Tax Web site at 

www.revenue.state.co.us/fyi/html/income09.html.

CT: New HEVs with a U.S. Environmental Protection 

Agency (EPA) fuel economy rating of at least 40 mpg are 

exempt from sales tax. To learn more, see the State of Connecticut Department of Revenue Services at www.ct.gov/drs.

FL: HEVs that are certified and labeled in accordance with 

federal regulations may be driven in high occupancy vehicle 

(HOV) lanes at any time, regardless of the number of passengers in the vehicle. To learn more visit the Florida Division 

of Motor Vehicles at www.hsmv.state.fl.us.

KY: Organizations or individuals located in non-attainment 

areas are eligible for Congestion Mitigation and Air Quality 

Improvement Program vehicle rebates for HEVs operating 

within a fleet. To learn more, visit the Kentucky Department 

of Revenue at revenue.ky.gov/.

ME: A partial sales tax credit of approximately $500 is available for hybrid cars that do not have a comparable vehicle 

model, such as the Toyota Prius and Honda Insight. A credit 

of approximately $300 is available for cars that do have a 

comparable gasoline-powered model, such as the hybrid 

Honda Civic. To learn more, visit Maine Revenue Services 

at www.state.me.us/revenue/.

NJ: New Jersey’s Alternate Fuel Vehicle (AFV) Rebate 

Program offers rebates to local government for HEVs. 

The rebate amounts vary according to the vehicle weight 

class and incremental cost. To learn more visit the New 

Jersey Division of Taxation at www.state.nj.us/treasury/

taxation/index.html.

NM: HEVs with a EPA fuel economy rating of at least 

27.5 miles per gallon are eligible for a one-time exemption 

from the motor vehicle excise tax. 

NY: New York’s Alternative Fuel (Clean Fuel) Vehicle Tax 

Incentive Program offers a sales tax exemption for qualified 

HEVs equal to $3000 unless the vehicle manufacturer certifies a higher incremenal cost. To learn more visit the New 

York State Department of Taxation and Finance at www.tax. 

state.ny.us/. There is also a tax credit of $2,000 for purchasers 

of qualified HEVs, see www.eere.energy. gov/afdc/laws/

incen_laws.html for details.