Printer Friendly

Cars of the future.

The Energy Policy Act of 1992 created a deduction under tax code section 179A for "qualified clean-fuel vehicle property" placed in service after June 30, 1993.

There are two types of qualified clean-fuel vehicles:

1. Vehicles that were originally manufactured to run on clean fuel. (For these, the deduction applies to the cost of the engine, fuel storage tank and delivery and exhaust systems.)

2. Vehicles converted to run on clean fuel. (Here, the deduction applies to the cost of the conversion.)

To qualify for the deduction, the vehicles must satisfy applicable federal and state emissions standards and use clean-burning fuels such as natural gas, liquified natural gas, liquefied petroleum gas, hydrogen, electricity or fuels containing at least 85% alcohol (including methanol or ethanol) or ether.

The deduction is limited to $2,000 for most cars and to $5,000 for trucks and vans with a gross vehicle weight anywhere between 10,000 and 26,000 pounds. The limit is $50,000 for trucks or vans with a gross vehicle weight over 26,000 pounds and for buses seating 20 or more adults.

For pleasure vehicles, the deduction is allowed in the first year of the vehicle's use. The vehicle must not have been acquired for resale, and the taxpayer must be the original owner.

Individuals receive a class-A deduction (for adjusted gross income), which is not subject to the 2% floor on miscellaneous itemized deductions or the overall limit on itemized deductions.

Finally, individuals are not required to use the clean-fuel vehicles in a trade or business to qualify. The deduction is not subject to the luxury auto depreciation limits of tax code section 280F.

Observation: The Energy Policy Act of 1992 also added tax code section 30, which provides a credit equal to the lesser of $4,000 or 10% of the vehicle's cost for each qualified new electric vehicle placed in service after June 30, 1993.

Such vehicles, however, are not eligible for the qualified clean-fuel vehicle property deduction described above.
COPYRIGHT 1993 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Energy Policy Act of 1992
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Jun 1, 1993
Previous Article:Estate tax charitable deduction fails due to lack of certainty.
Next Article:Deduction of FSLIC reserves: in CEBA's wake.

Related Articles
Tax changes in energy bill.
Is this land really our land? Impacts of free trade agreements on U.S. environmental protection.
Energy policy from Nixon to Clinton: from grand provider to market facilitator.
States driving toward AFVs.
Savings in the Energy Account.
Biodiesel Completes Clean Air Tests.
Purchasing power. (Updates).
Consumption to blame, not Bush.
An introduction to liability, negligence, and all things in between: Part I.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters