Clean Fuel Tax Deductions

Following are excerpts from IRS Publication 535 viewable at http://www.irs.gov/publications/p535/ch12.html#d0e10094.

You are allowed a limited deduction for the cost of clean-fuel vehicle property and clean-fuel vehicle refueling property you place in service during the tax year.

Clean-burning fuels. The following are clean-burning fuels.

  1. Natural gas.
  2. Liquefied natural gas.
  3. Liquefied petroleum gas.
  4. Hydrogen.
  5. Electricity.
  6. Any other fuel that is at least 85% alcohol (any kind) or ether.

 

Deduction for Clean-Fuel Vehicle Property

The deduction for this property may be claimed regardless of whether the property is used in a trade or business

Clean-fuel vehicle property. Clean-fuel vehicle property is either of the following kinds of property.

Any property installed on a motor vehicle (including installation costs) to enable it to be propelled by a clean-burning fuel

  1. The property is an engine (or modification of an engine) that can use a clean-burning fuel, or
  2. The property is used to store or deliver that fuel to the engine or to exhaust gases from the combustion of that fuel.

 

For vehicles that may be propelled by both a clean-burning fuel and any other fuel, your deduction is generally the additional cost of permitting the use of the clean-burning fuel.

"The deduction for this property may be claimed regardless of whether the property is used in a trade or business."

Keep the receipts - according to this you should get your installation costs back as well:

"Any property installed on a motor vehicle (including installation costs) to enable it to be propelled by a clean-burning fuel*."
"For vehicles that may be propelled by both a clean-burning fuel* and any other fuel, your deduction is generally the additional cost of permitting the use of the clean-burning fuel."

* The IRS defines Hydrogen as one of several "clean-burning fuels."

You can get back up to $2,000 for a car, or up to $50,000 for a truck

"Deduction limit. The maximum deduction you can claim for qualified clean-fuel vehicle property with respect to any motor vehicle is one of the following.
1. $50,000 for a truck or van with a gross vehicle weight rating over 26,000 pounds or for a bus with a seating capacity of at least 20 adults (excluding the driver).
2. $5,000 for a truck or van with a gross vehicle weight rating over 10,000 pounds but not more than 26,000 pounds.
3. $2,000 for a vehicle not included in (1) or (2)."

Following are excerpts from IRS Publication 535 viewable at http://www.irs.gov/publications/p535/ch12.html#d0e10094.

Also see California Air Resources Board - Alternative Fuels

Qualifying Products