This is an analysis of the tax law that pertains to the "clean fuel properties" deduction (form 535), as provided by Insight owner Neil J Young. He also points out that the Insight does not qualify for the electric vehicle credit (form 8834).

For you US taxpayers here is the answer to your tax questions.  We 
should be entitled to a $2,000 deduction from gross income (not an 
itemized deduction), but not a tax credit.  Read on for more 
information:

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Based on my quick reading of Section 30 and Section 179A of the 
Internal Revenue Code, as amended, ("IRC") and a review of the 
Committee Reports on Public Law 102-486, the Energy Policy Act of
1992 (as amended by P.L. 104-188), I will offer the following general 
observations. You should consult your own tax advisor for specific
tax advice.  Ignore the technical stuff, just like I do when reading 
many of the physics and engineering posts in this e-group.  

(1) TAX DEDUCTION -  IRC Sec. 179A provides a tax deduction.  But
this is not an itemized deduction subject to all the limitations and 
phase-out provisions (disguised tax increases), it is deductible in 
computing your "adjusted gross income".  (See IRC Sec. 62(a)(14)).   
Thus, everyone can take advantage of this deduction as long as you 
have any income to deduct it from.  Also, the Insight does not have
to be used in "business" (I saw a post on the e-group that  the IRS 
telephone help staff said it must be business use - the IRS is wrong).
 

The amount of the deduction for the Insight is limited by two
separate criteria.  First, the deduction cannot exceed $2,000.  
Second, the deduction cannot exceed  the incremental cost of the 
electric motor (IRC Sec. 179A(a)(2),  Further, only "the portion of 
the basis of the vehicle which is attributable to an engine which may 
use such fuel,to the storage or delivery to the engine of such fuel, 
or to the exhaust of gasses from combustion of such fuel" (See IRC 
Sec. 179A(c)(1)(B)). Thus, electric motor, the batteries, and other 
components including software which relate to running the electric 
assist motor appear to qualify.  As long as these costs are at least 
incrementally $2,000, then the amount of the deduction should be 
$2,000.

There are other rules regarding the tax DEDUCTION.  A few (but not 
all) are:

-- must be claimed only in the year you get the car (IRC Sec. 
179A(a)(1));

-- the deduction begins to phase out for people buying their cars in 
2002 (IRC Sec. 179A(B)(1)(b));

-- you must be the original user of the car, used Insights do not 
qualify (IRC Sec. 179A(c)(1));

-- the Insight must meet Federal and State environmental emission 
standards for both the gasoline engine and the electric motor  (Sec. 
179A(c)(2)(A));

-- the Insight must be able to pass Federal and State emission
related certification, testing and warranty requirements (Sec. 
179A(c)(2)(B));

-- you must recapture the deduction if you dispose of the car or the 
electric motor is no longer working (IRC Sec.179A(e)(4) and Treas. 
Reg. Sec. 1.179A-1(b));

-- it must be used in the US (Sec 179A(e)(5));

-- if part of the costs is taken as a business deduction you can't 
double deduct (IRC Sec. 179A(e)(5));

-- the basis of the car is reduced by the tax deduction (IRC Sec. 
179A(e)(6)(a));

2)  TAX CREDIT -- IRC Sec. 30 provides a Tax CREDIT.  However, I do 
NOT believe the Honda Insight qualifies for the credit.  A qualified 
electric vehicle means a motor vehicle which is powered primarily by 
an electric motor drawing current form rechargeable batteries, fuel 
cells, or other portable sources of electrical current. (See IRC Sec. 
30(c)(1)(A)).  I read "primarily" as more than 50%, so unless someone 
can provide a good argument that the Insight runs more on battery
than on gasoline, the car does not qualify for the tax credit.