2006 Tax Credit Finally Settled

Just an FYI/comparison regarding the 2005 deduction of $2000.

I just did my 2005 taxes with TurboTax. I am subject to about $2800 AMT, but from what my taxes say, the AMT apparently does not affect deductions like it does tax credits? If I figure my tax with the $2000 deduction, I save $660 (I am in 33% marginal bracket) over the tax I would have paid without the [edit]deduction[/edit].

Ironically, given my AMT amount I would have only benefited about $300 if I had been given the $3150 tax credit instead of the deduction last year. So for me, the deduction seems like the better benefit.

AMT really sucks. I believe it may be getting worse year by year. This is first year I got hit with AMT.

 

Sorry but No.
No part of the credit will carry forward.

 

The amount you have withdrawn goes to pay your tax liability, it doesn't change it.
So, no, don't change your W-4 exemptions (especially if you don't understand the previous sentence).

 

It appears to me that he is listing the order in which credits may be taken and not a formula.
Implicit in his list is the assumption that the sum of the credits listed do not exceed the difference between your regular tax liability and your AMT.
In other words, the sum of all these non-refundable credits cannot reduce your tax liability below your AMT.

 

How do I show that I qualify for the tax credit for 2006 for the 2006 prius I bought on Jan 3, 2006. I didn't get any type of certificate. Is there something I need to apply for?

 

This is the link to the Toyota page that will contain the information soon after the 2006 MY Prius is certified: http://www.toyota.com/prius/tax.html
Keep your proof of purchase information. (If you lose it, request copies from your dealer.)
Most likely, Toyota will mail out certification letters shortly after the 2006 MY Prius is certified.

 

It still sounds like there may be some confusion about the term "tax liability"..

What your liable for has absolutely nothing to do with what you paid in or didn't pay in during the year..... Uncle Sam still decides what you are liable for based on your status etc....

If you paid in more than your liable for, then you get a normal refund, if not, you still owe more.

The Credit we are talking about simply detracts what what you are liable for... meaning if you have paid in during the year the total amount your liable for, then in that case, you would get your 3150 credit back "providing you paid in that much - and were liable for that much.

 

I either heard or read a rumor that there is a prorata recapture of the 2006 tax credit IF you sell the car before a 3 year holding period. Anyone know if this is true.

 

Not true.
The law does state that the car cannot be purchased with the intent to resell.
I suppose it's possible, although unlikely, that the IRS rules (not yet published) could include such a recapture.

 

I understand that what I have withdrawn from my paycheck (based on W4) is paid against my tax liablility. I was thinking that the credit would be applied to what I OWED in taxes, after those withdrawals were applied to my tax liability. So if I owed $3150 at the end of the year, this credit would reduce what I owed to zero, but if I owed $2000, the credit would reduce what I owed to zero but I would only see $2000 in benefit from it.

I think the light bulb is starting to brighten, and I understand the above is NOT valid, so tell me if this is on the right track now... If my tax liability at the end of the year was $13150 the credit would reduce that to an even $10000. My tax refund or payment would then be based on how my paycheck withdrawals compared to the $10K amount (without taking into account other deductions, credits, etc of course). The only reasons that I would not see the full beneifit of $3150 would be:

1) less than $3150 in tax liability
2) taxable income (or AMT) is high enough to cause a reduction in the allowable credit amount
3) wait too long to buy and the credit gets reduced in the 1st full qtr after the 60,000 Toyota hybrid sale

So with my original scenario where we plan for a small refund each year, if we make a timely Prius purchase this year we should get our typical small refund + $3150 from our 2006 taxes.

 

By George, I think he's got it!

Close enough anyway. The credit begins to phase out the quarter AFTER the quarter AFTER the quarter in which a manufacturer sells 60k vehicles (from January 01, 2006).
So, even in Toyota sold 60k qualified hybrids in January, the full credit would still last through June 30, 2006. B)

 

Can the original poster please edit the thread title? I'm hoping it'll also change it in the list view too.

It's one of my pet peeves to see misleading post titles constantly (here and on other boards), esp. since people are replying to the topic, bumping it up. The news isn't new and it's not "settled" in my book in that we still don't know if estimated $3150 credit for Priuses taken in 06 (but before the phase out) is accurate.

 

What I liked about the 2000.00 "adjustment" for 2005 was that it dropped my AGI. My buddy's a tax guy, and he always likes to say, "It's ALL about the AGI!" That's because it affects so many phase-outs (student loan deductions, passive income loss limitations, etc.) My taxes are pretty simple, so I use TurboTax, also. BIG DADDY--did you have the same trouble I had getting the 2000.00 on line 35 (with "clean fuel" typed beside it? It took a little head-scratchin' for me...

 

I bought a 2005 Prius in October. It was totaled in December. I bought a 2006 Prius in January.

Do I qualify for both the 2005 deduction AND the 2006 credit? I'm assuming yes, but please correct me if I'm wrong. Thanks.

 

Two questions-

From Toyota information, the event determining the date is delivery rather than date of purchase. For example, if purchased in December, but delivery not taken until January (with a delivery checklist dated in January) seems that the credit would apply. Unless when the IRS forms come out, they specifically require purchase paperwork.

Any comments on this?

(From the Toyota site
3. The purchaser must accept delivery of the Hybrid vehicle from the dealer on or after January 1, 2006. A Hybrid vehicle delivered before that date may qualify for the previously available $2,000 tax deduction, but will not qualify for the hybrid tax credit. However, a Hybrid vehicle delivered on or after January 1, 2006 will no longer qualify for the $2,000 tax deduction.)

Second question

I think this was discussed above in the context of the 2006 credit, but my question if a Prius is purchased in 2005 and sold in 2006, can the 2005 deduction still be taken or is there some rule about having to hold onto the car for 3 years - otherwise deduction not eligible and if already filed, must do an amended return.

Any comments?

Thanks,

John

 

Yes. You should qualify for both (AMT considerations notwithstanding).

 

First answer) Not sure what you're asking.
Second answer) Since, written into the law a statement that, to qualify, the vehicle cannot have been purchased with the intent of reselling, the IRS might give you the stinkeye. I'm sure the IRS has setup some internal guidelinesfor how to handle this kind of situation.
Consult your tax advisor if this is an issue for you.

 

First question clarification:

Vehicle purchased December 2005 to start HOV paperwork, but left with dealer until January when actually took delivery. Purchase paperwork dated December, but delivery checklist dated January. Question is if IRS guidelines will be consistent with Toyota web site, specifying delivery must be after January 1, 2006, or if they will require purchase paperwork. Or if they will not require any backup to be submitted.

Second question comment:

Will have to look at the law on this. If purchased not with the intent to resell, but ended up reselling, probably does not matter what the intent was.

 

I'm betting that in "IRS-eze", Take Delivery = Purchase, therefore you purchased the vehicle in December, have documents dated in December to show this, and therefore are only eligible for the 2005 $2000 deduction, which you should claim in your current taxes.

A "delivery checklist" is not a legal document - more of a "proof of job performance" for the salesman.