With growing concern about the effects of fossil fuel consumption and the environment coming into the consciousness of the average American, many car companies are beginning to offer hybrid cars that run on electricity and fuel as an environmentally and financially friendly option. Hybrid cars offer better fuel efficiency in a world in which fuel prices are ever climbing.

Tax Relief

For the owners of hybrid cars, the Federal government is offering a tax deduction in the form of what is called a clean-burning fuel deduction. This deduction offers owners of hybrid cars that have been driven during 2004 and 2005 a maximum deduction of $2,000. The maximum deduction for a car put into operation in 2006 is $500 and no deductions will be offered to hybrid cars that are put into operation in any following year. The deduction must be made using a 1040 tax form and must be taken during the first year that the hybrid car is used. The deduction is only offered one time and can only be claimed by the original owner of the hybrid car.

Hybrid Models

Some of the hybrid cars that are eligible for the deduction include the Honda Civic Hybrid, the Honda Accord Hybrid, the Honda Insight Hybrid, the Ford Escape Hybrid, and the Toyota Prius.

Tax Relief Still Available

For hybrid owners that were unaware of the tax deduction incentive available and did not fill out their tax form in a manner that would reflect their hybrid usage, there is still tax relief available in the form of a 1040X, Amended U.S. Individual Income Tax Return. This tax return amendment must be filed within three years of the filing of the original tax return or within two years of the payment of the actual taxes, whichever is the later of the two. The clean-burning fuel deduction is officially classified as an adjustment to income and does not require that itemization of tax deductions be done in order to receive it. The deduction should be documented to the left of line 35 on the 1040 tax form and should be written as Clean-Fuel.