$3100 Prius tax credit question.

Do NOT believe this tactic will fool the IRS.
You should expect an audit if you do this.

 

Actually, if he did that...the state would be after him for under reporting of sales tax since they go by the current market value of the vehicle and if the sales price is not close you are asking for trouble. I know Wisconsin is like this.

By the way why should he sell it to you if he really wants the car and got you to pay for it. I think I would for go the credit.

 

Come on now... Would someone in the above situation REALLY be anywhere near buying a $18-19000 brand new car (net price after credits)??? The person above is not the target. Who typically buys a car in this price range? Firmly entrenched in the middle class price range. &, gee how this credit never came up during the Clinton Administration, but during the era with a Republican White House & Congress is a mystery to me???

But wait, let's fix this... and just GIVE everyone in the above situation a new Prius! That would solve everything! B)

 

Calm down First, it won't happen. I already got my Prius and I'm just doing some what-ifs. My first what-if is I give my brother $23,000(which I don't have) to buy a Prius and when he gets his higher tax refund due to the credit, we split. I have a car, plus $1500. He gets $1500 for doing that.

As far as the car thing, I sold my mother an old Subaru for $100 though it was worth about $4000. My uncle had given that same Subaru to me years earlier and when we went to the DMV they had no problem with the sales price being $0. My brother's sister in-law sold him and his wife a car way under it's market value, all legit. I think there is a long standing "tradition" in this country called capitalism. Two people can transact a business deal at whatever price the two agree upon. I don't think the state can come in and say "You should have sold it to your brother for $20,000 and therefore we want our $1200 tax."

 

I can't get the credit because I paid AMT last year.

 

I don't think it's illegal to sell a car for $1.
I guess one question is, how long do you have to own the car to claim the tax credit? If you buy it, drive it to work one day and then sell it the next, can you still get the credit? And if you can, that's just a little loophole they should fix.

 

In Wisconsin, they can....I was was just doing what ifs...At no time did I think your brother would do something like that...aren't what ifs fun to ponder. :lol:

 

thank you for your wonderful attitude. obviously you dont feel that the people most likely to be driving a smoking 20 year old heap AND contributing three times their share of polution dont need help.

iow, people who worked for their money deserve the credit and no one else. why give someone who is living paycheck to paycheck a hand?? much rather give it to someone who can probably live just fine without it.

YA thats it@!

forget the trailer trash!! more Priuses for us...after all, the medium income of a Prius owner is much higher than average...education level too!!

too bad that education doesnt provide common sense

 

It's not illegal.
You will be liable for sales tax for the real value of the car.
(Sorry, not IRS but state sales tax.)

You will get the credit under the situation described above.
You don't even have to drive it to work, just off the lot.
Of course, why would someone buy it from you at full price then when they could buy a "new" car and get the credit?

 

Well in all fairness, it sounds like this woman you know is getting a hand. In the end your saying she won't pay any taxes ans will get something extra. I think it's fair to say this tax credit is a "Luxury tax break". But putting this woman in a car that gets better mileage is not what I would call an important social need. You can argue she can get affordable transportation with reasonable mileage in the used car market.

I'm just making a point...but I sense a tirade approaching. :huh:

 

It must differ from state to state, but I can't imagine it's that simple. I mean, if you give your kid your old car, you have to pay sales tax? There must be some exemptions.

 

Check out my earlier post where I made up a plan with my brother to split some money.

 

Hey, I went to the Wis DMV site. The title application states that it is illegal to understate the SALES price, not the value of the car. I think the point is that if you buy for $10,000, you better not say you only paid $1 to beat taxes. But if you have a receipt that shows it was sold for $1, then there would be nothing illegal.

 

If your state has a gift tax, you'd be guilty of tax evasion.

 

Well, there is a federal gift tax...that allows $11,000 per person. Just a guess, but most states follow the feds lead. I would guess the IRS is not spending resources checking how many auto sales are done below market value, they're stretched pretty thin as it is.

Just to carry this "Plan" to it's full measure...here goes...

I have my brother and his wife buy a Prius for say $24,000 in 2006. They sell it to me the next day for $22,000. A reasonable price considering cars lose what, 20% the minute they drive off the lot. He gets a $3000 credit on his taxes. I let him keep $2000 making his net gain/loss $0, and I get $1000 dollars. In the end, I paid $21,000 for a Prius, my brother makes nothing, but "someday...and that day may never come..." he will ask me for a favor.

 

I hate to confuse anyone further concerning the tax credit - but a little tax planning can go a long way.

I will be cashing in some mutual funds to buy my Prius. Prior to the end of 2005 I cashed in some mutual funds that will result in a capital loss (The funds are worth less now than when I bought them in 1999). I can take up to $3000 in capital losses deduction against my taxable income in 2005 and lower my taxes owed in 2005.

The funds that show a capital gain (funds worth more now than when I bought them in 1999) I will cash in in 2006, which will in turn increase my taxable income in 2006. As it happens it should increase my taxes owed in 2006 just enough to be able to take full advantage of the $3150 credit.

So I reduce my taxes owed in both 2005 and 2006! It helps to understand the tax laws and use them to your advantage. You don't have to make a lot of money to benefit from the credits - you just have to figure out how to use them to your best advantage.

Springtime

 

so, can you claim the credit also?

 

but wouldn't each of you have to pay sales tax?

 

The nice thing about Turbo Tax, or any software, is if you save previous returns it will review them for carry overs. When I did my taxes this year it carried over capital losses from the year before.

 

No, only the original buyer can claim the credit.