2006 Tax Credit Finally Settled

Yep, this was announced on the 13'th.

Treasury and IRS Issues Guidance, Regarding Hybrid and Lean Burn Vehicles

 

Does anyone know how the 06 credit will be validated or applied for? Does the date you register your car determine whether or not you can go for it?

 

What do you mean "not per model?"

YOu mean they are counting every truck, car etc that is being manufactured too?.. That doesn't seem to make sense... but since when does the Fed have to make sense?

 

Your signature indicates you have already bought an '06---right? If you didn't take delivery of it until Jan. 1 or after, you're "validated". If you took delivery of it in calendar '05, you're out of luck for THIS tax credit; but you're eligible for a tax DEDUCTION of $2000 from adjusted gross income, which will yield you about $600 when you file your taxes for '05. Neither tax break needs to be "applied for" in a separate paper transaction with the Feds. They're simply calculated (by you or your tax preparer) into your tax form.

Or have you only ordered an '06 so far?

 

It's by manufacturer.. all Prius', 400h, HH, and soon TCH's will/may be counted toward the 60000 unit cap. ( Maybe not the TCH's but those in 3rd Qtr should get the applicable credit ).

 

Does this mean if I buy a 2006 Prius anytime during this year, including December 2006 - I will receive a tax CREDIT for $3,150? Meaning I'm paying Price of Prius - $3,150???

 

No, it certainly does not.
However, if you buy a new Prius (model year 2005 or 2006) before July 01, 2006 and your AMT is at least ~$3150 less than your tax burden and the estimated tax credit (not official amount yet) is ~$3150, you will be eligible for the full ~$3150 credit.
After June 30, 2006, the tax credit for Toyota hybrid vehicles will begin to phase out if Toyota manages to sell 60k hybrid vehicles of any model in the first quarter of 2006.
It is possible that Toyota might reach the 60K mark in Q1 but I think Q2 is more likely, in which case, the credit would not begin to phase out until October 01, 2006.

 

No. If you buy a 2006 Prius in the first two quarters of this year, you are guaranteed to be eligible for the full credit (whether you actually receive it or depends on your individual tax scenario in general and your AMT to be more specific).

The tax credits phase out starting the second quarter after an automaker hits 60000 hybrid car/truck sales in 2006.

So even if Toyota sells 60000 hybrid autos on Jan. 1, full tax credit will be allowed on all hybrid autos that Toyota sells in 1st and 2nd quaters of 2006.
If, more realistically, then hit the 60000 mark in 2nd quarter of this year, then all people who buy Toyota/Lexus hybrids in the first 3 quarters of this year will be eligible for a full tax credit.

After that time period, the tax credit progressively drops.
Hope that makes sense.

 

Kiloran and Vega's understanding of the tax credit mirror mine. I'll just add that the phase-out is 25% per quarter, or about $800.

I think by the end of 2006, barring another huge jump in petrol prices, Prius will sell for less than msrp, offsetting the decrease in the credit limit. So if you have a reason to wait a while before buying, I wouldn't let the tax credit sway you too much.

In another 18 months or so, rumblings of the next Prius revision will hit the 'net, and I'd imagine a used Prius market will develop that may be a good buy money wise.

In short -- avoid impulse buying. Time is on your side.

 

Does anyone know if the tax credit will be on the E-Z 1040 IRS form for next year as a one liner?

 

Almost.
The phaseout is faster than that and the initial drop will be ~$1575.

from the Phase-out_of_the_hybrid_tax_credit section of our FAQ:
Phase-out of the hybrid tax credit
In short, the period for the full hybrid vehicle tax credit lasts at least through the second quarter of 2006.
The date you take possession of the vehicle (not the order date) is the applicable date for purposes of the tax credit.
The 60,000 hybrid vehicle threshhold includes all models the manufacture sells after December 31, 2005.
If 60k hybrid vehicles are sold by a manufacturer sometime in the first quarter of 2006, the tax credit will follow the following schedule:
(2006Q1) - 100%
(2006Q2) - 100%
(2006Q3) - 50%
(2006Q4) - 50%
(2007Q1) - 25%
(2007Q2) - 25%
If the 60k threshold is reached in a later quarter, the 100% period will be longer for as many additional quarters as it took to meet that threshhold.
The quarters start on January 01, April 01, July 01, and October 01.
This means that the full tax credit for Toyota will be in effect at least until June 30, 2006.

 

Probably not.
Like the $2000 deduction it replaces, it will likely be on 1040 without itemization necessary and not 1040-EZ.
This is just an educated guess, however. B)

 

Kiloran is right (p 1418 of the Energy act): the first phaseout is a 50% decrement for two quarters, and then two quarters at 25% on the initital credit. Not 25% every quarter as I had posted.

2006 Energy Act

 

I thought that whether or not AMT applied was based on a pre-credit tax liability basis. If your calculated tax liability based on your net taxable income is less than your AMT, then your tax liability is the AMT and the credits available to you may be reduced by a percentage (or possibly phased out based on income). Conversely, if your tax liability is $500 more than AMT, you should be able to use any credits available to you even if that brings your net below AMT.

If you look at the current 1040 and instructions, the AMT calculation and comparison is done pre-credits.

Of course, we won't know for sure until the 2006 forms and instructions come out.

 

Not so.
I have read the applicable section of the Energy Policy Act of 2005 as well as postings on reliable NGOs and it is VERY clear that the credit will not reduce your tax liability below your AMT.
I have quoted the text of the law in other threads and can locate it again if you really need to read it for yourself.

 

So, can you carry the credit forward? If you pay AMT for TY2006, can you carry it forward for TY2007?

Nate

 

Kiloran, I have read the energy policy and am aware of the part which says the personal credit will be limited to the amount of the tax liability less credits under the policy over the tentative minimum tax. However, we can only speculate how this will come to life until the IRS has issued the forms and instructions. This credit will most certainly (like other credits) have its own form to calculate any impact that AMT may have.

Also, the formula posted by Too Tall for 'maximum hybrid credit' subtracts credits outside the policy. How can that be if the policy says you compare regular tax less credits under subpart A and sections 27 and 30?

 

Does this mean that if I typically set up our W-4 exemptions such that we get a small refund, that this credit does me absolutely no good? Should I tweak our exemptions such that we would end up owing uncle sam $3150 at the end of the year, which would then be reduced to $0 by this credit and put more money in our pockets each paycheck?