Tax Cut & Tax Credit

there was a Federal Income Tax credit, but i think you had to have bought the car in '03. it expired at the turn of the year. i almost took a shot at that last year, but when i discovered that the credit was ONLY good against earned income, i put off ordering the car. [i'm retired, and had zero earned income last FY]. now, in January, i ordered the Prius, and there's a huge backlog. back in October-November around here, i practically could have driven one off the lot!

Dang!!

+af

 

It's a deduction, not a credit and the deduction is reported on Line 33 of Form 1040. If Tax Cut doesn't have a question concerning the deduction, you should still be able to insert the deduction manually (identify it as "Clean-Fuel", see Pub. 535).

I'm using Turbo Tax and there's a question re the "Clean-Fuel Vehicle Deduction". If the answer is in the affirmative (that you placed the vehicle in service during 2003), you're taken to a page where the Prius, Civic Hybrid, and Insight are mentioned by name.

 

it is in there, i can't recall the exact spot, but early on when you calculate your fed txable income. it was one of the check box screens, on the interview (one of those "most people don't have these but" screens)

sorry i am not near my computer , so i can't pinpoint for you

 

check the posts at http://priuschat.com/forums/viewtopic.php?t=657

+af

 

Also, the tax deduction in '04 is $1500, at least as it stands now. If you purchased in '03, it was $2000.

 

i apologize... yes: it's a deduction, not a credit. i sit corrected.

 

Does it make a difference whether you are buying or leasing for the tax deduction?

 

I'm pretty sure lessees don't qualify for the deduction.

 

But the "Clean-fuel Vehicle Deduction" ONLY applies to Earned Income, is that right?

I'm an actor, with most income coming in on 1099s. My accountant says the deduction will do me no good since I've already maxed out (my relatively small amount of actual W-2 income) with the typical dependant credits and mortgage interest credits.

Someone tell me he's wrong!

:?

 

thinkgreat04 wrote: But the "Clean-fuel Vehicle Deduction" ONLY applies to Earned Income, is that right?

Nope, that's wrong. The deduction is not limited to "earned income". For example, a taxpayer could still use the deduction even if the only source of his or her income was from interest or dividends (i.e. "unearned").


I'm an actor, with most income coming in on 1099s. My accountant says the deduction will do me no good since I've already maxed out (my relatively small amount of actual W-2 income) with the typical dependant credits and mortgage interest credits.


Yep, that's possible. This deduction is more akin to an "adjustment" in the sense that it reduces AGI (adjusted gross income). Since the total amount of your itemized deductions and personal exemptions are subtracted from your AGI to arrive at your Taxable Income, the inclusion of the Clean-Fuel Deduction may not affect the result (i.e. zero "taxable income" either way).

Here are two examples:

1) Clean-Fuel Deduction claimed:

AGI.........................................$18,000 ($20,000 Gross income)
Less: itemized deductions......$12,000
Less: personal exemptions....$12,200

Equal: Taxable Income...............0


2) No Clean-Fuel Deduction taken:

AGI..........................................$20,000
Less: itemized deductions......$12,000
Less: personal exemptions.....$12,200

Equal: Taxable Income...............0