2004 Prius Tax Deduction

Any news on the 2005 deductions? I'm buying one this year and don't know how to claim it.

 

You just need to use form 1040 to claim it. $2000 tax deduction on 2004-5 hybrids:

http://www.irs.gov/newsroom/article/0,,id=...=107766,00.html

I see that they haven't edited the page to include the Highlander Hybrid or Lexus Hybrid :wink:

 

Here are the specific numbers that I put together for another thread. I think the actual numbers make the whole "deduction" thing easier to understand.

I got the tax rates from the HR Block web site.

The first column is your income, the second column would be your tax rate, and the 3rd column would be what you get back for buying a Prius when the tax deduction is $2000.

If you paid no taxes, then you will get nothing back. But if you paid no taxes, then how did you afford to buy the Prius?

$0 to $14,600 ------------10% --- Or- $200
$14,600 to $59,400 -----15% --- Or $300
$59,400 to $119,950 ----25% ---Or $500
$119,950 to $182,800 --- 28% ---Or $560
$182,450 to $326,450 --- 33% ---Or $660
$326,450 to -infinity-- ----35% --- Or $700

If the current energy bill passes with the increase that GW has talked about, the deduction will go to $4000 and the numbers above will double.

YOu do not need to itemize your deductions to get this deduction. It is listed separately on the 1040 form. However, be careful as nowhere on the 1040 does it make it clear what you can do here.

I have Turbo Tax electronic software. And Turbo tax even does not make it clear. This is a clean fuel deduction, and NOT a Hybrid deduction, and nowhere will it say "IF you were wise enought to buy a 2005[4] Toyota Prius Hybrid, check here and collect $200.

Turbo tax put the $2000 on line 35 of my 1040. The software typed in the words "Clean-Fuel" on the dotted line and then in the column it put the $2000.

Line 35 on the 1040 starts out ""Add lines 23-34a....."
This is how it looked:

35 Add lines 23 through 34a...................Clean-Fuel..........2,000.. ___ 35 ______ 2,000

Hopefully, the 2005 1040 will be a little clearer. I'm sure there are people who own a Prius who missed this, as the 1040 is very much less than clear.

 

Good analysis, but you omit one very important point. Once you get into the higher brackets you start giving back a percentage of your deductions so it is highly unlikely that anyone would really benefit by more than about $600 - but it is still something.

 

Don't forget state income/sales tax deductions!

 

<div class='quotetop'>QUOTE(kirbinster\";p=\"106018)</div>

I never heard of this. I don't think there is any such thing. Are you referring to the "alternative minimum tax"?

The Alternative Minimum tax does burn people who have a lot of deductions, but it does NOT burn you because you are rich, unless you have a ton of itemized deductions. And some rich people may have a ton of itemized deductions. But the tax loopholes that are available to the rich are a lot more complex than the itemized deductions available to the rest of us. And they are a lot bigger too.

Thus, the Alternative Minimum Tax is yet another burden on the middle class primarily, and not on the rich.

So I have no idea what you are talking about when you say that the rich get less itemized deductions. Never heard of such a thing.

 

In CA, it would actually be beneficial if this were itemized, b/c then the same amount would be deducted from CA state taxable income. I discovered this after poring over the tax returns spit out by TurboTax and TaxAct (TurboTax did everything correctly and charged more for the service, while TaxAct had some problems, but did give me a lower, albeit incorrect, amount of tax owed and was a cheaper service).

There are no state deductions/credits here, unfortunately. I think they were phased out due to the financial quandary of the state.

I only recently discovered the limits on itemized deductions from a friend. I believe this is what the marriage tax is about, but I'm not sure. The link should enlighten or further obfuscate the matter, depending on your ability to interpret the US tax code.

 

What I was talking about is there is a phase out of Federal itemized deductions once your income hits certain limits. Thus, the value of a deduction is not truly what you claim if you are above a certain income level. The AMT is even worse, but a different issue. If you live in a state with high income taxes and high property taxes (like NY, NJ and others) you don't have to make much to get hit by the AMT - and that will suck in more and more people each year.

 

How is that different than what I linked?

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How Do You Figure the Limit?

If your itemized deductions are subject to the limit, the total of all your itemized deductions is reduced by the smaller of:

• 3% of the amount by which your AGI exceeds $142,700 ($71,350 if married filing separately), or
  
• 80% of your itemized deductions that are affected by the limit. See Which Itemized Deductions Are Limited, earlier.
  • 
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