Yearend Planning Can Help Come Tax Time AP put this story out today and it is being widely circulated. The author seems to be completely unaware of the tax changes in the Energy Policy Act of 2005. From the article: "$2,000 for people who purchased a hybrid vehicle — one with an electric motor and a gas-powered engine such as a Toyota Prius, Honda Insight or Ford Escape Hybrid — in 2004. A similar deduction will be allowed for hybrids put on the road for the first time in 2005, but the deduction will fall to $500 in 2006 and disappear the following year." From the PC Toyota Prius FAQ Estimated Federal Tax Credit Incentive The 2006 federal income tax credit for the Toyota Prius is generally estimated at $3150. This credit is intended to offset the cost of a car being outfitted with hybrid technology. Individuals can claim the credit for each vehicle that they purchase. Since this is a tax credit your tax bill is reduced dollar for dollar, it will not reduce your tax bill below your alternative minimum tax. The prior law's tax deduction of $2000 is still in effect until the end of 2005. Under the prior law, those in the top tax bracket would realize a maximum tax savings of $700 if they purchase a hybrid vehicle before January 01, 2005.
There are several references to "2004" in the article. I think she just recycled last years article and didn't do a very good job updating it! Clueless publishing...but not unexpected for internet drivel.
Obviously the author should not be giving tax advice - the $2000 deduction is correct, but to fail to mention the new 2006 credits is a disservice. I personally am patiently (not really!!!) waiting for my Prius because of that credit. My car came in 3 weeks ago, but the credit makes waiting a couple of months economically the only way to go. $3150 tax credit vs $2000 deduction - a no brainer.
