There are no credits for hybrid vehicles in 2005. The Hybrid Vehicle Credit is only available for vehicles purchased after 12/31/05. There is an electric motor vehicle credit, but I am not aware of any vehicles that actually qualify for that credit.

However, for 2005, there is a Clean-fuel Vehicle deduction of up to $2,000. There were about 8 qualifying hybrid vehicles (1 Ford, 1 Mercury, 3 Hondas, 1 Lexus and 2 Toyotas). Otherwise, your depreciation (and other actual costs) would be a function of the percentage of your business use, coupled with certain vehicle depreciation limits.

You might be better off to take the $2,000 Clean-fuel deduction (which does not require any business use at all) and then take the standard mileage deduction for your business use.

As you can see, there are quite a few variables involved in determining what is the best way to go in this situation.

Gary

Zip Code: 43232

Check out our newsletter this month. One of the articles in on the Hybrid Car Tax Credit. You can find the article at www.mdtaxes.com/news0606.html.