2006 Tax Credit Finally Settled

Thanks to all for the answer regarding the tax credit being limited to the tax liability, i.e. can't go negative.

For those who wondered how I can afford a 20k car with such a small taxable income...
I recently retired and until social security starts in a few years, I am living on a small pension and after-tax savings and investments. My only taxable income is on the pension and interest/dividends generated by the savings/investments. I also slowly use up the principle over a period of years. Part of my financial plan includes allowance for replacing my car every 7-9 years by using part of the principle.

 

Congrats on retirement. Unfortunately, I will be working for a long time.

 

Oh good.. wern't trying to be nosey.. just thought you might be a highschooler getting ready to make a boo boo.....

Now I'm envious!

 

Sorry if I'm bringing up an old topic, but what you said here confused me and I'm just really trying to understand.

Based on what I'm understanding the 2006 tax credit will reduce my tax liability, so that if I would have been liable for $5150 this tax credit will reduce that liabilty to $2000. So if in all of 2006 I had $5000 in taxes taken out of my paycheck I would be eligible for a $3000 refund ($5000 paid - $2000 liable). If my thinking is right on this then why would I not want to adjust my W-4 exemptions such that in all of 2006 I only have $2000 in taxes taken out of my paycheck? That way I would get the benefit of the tax credit in the 2006 calendar year rather than 2007 when I file my 2006 taxes. I want to use the extra money to pay off my Prius sooner, so by paying more money sooner rather than later less interest accrues on my auto loan.

 

That would certainly work. Just be sure you will get to recognize the full credit before you reduce your withholding so you don't get stuck with any penalties.

 

I just received this link from my dealer in Irving Texas for the tax credit

http://toyota.com/prius/

Click on the federal tax credit hyperlink at the bottom of the text and you will be linked to a page with additional hyperlinks to the Toyota Certification letter and the IRS acceptance letter for the 2006 Prius.

Paul
2006 Prius
44.5 mpg

 

I haven't seen anyone ask this question, and I can't find it in the tax publications to date, but...

We're considering buying a second 2006 Prius soon.

Anyone hazard a guess as to whether or not we could claim 2 x $3150 tax credit for 2006?

Maybe married filing separately?

 

We never do the itemized return as we don't make the threshhold. Therefore, I'm assuming that the 1040 will have a line for hybrid car credit. Please correct me if I'm off base.

 

Even if the allow two credits, you still have the issue of the tentative minimum tax. If most cases, married filing joint saves mucho dinero over filing separately.

 

You're right - there should be a line in the credits section for this. You will most likely have to use the full form 1040.

 

Finally because of http://priuschat.com/Some-Toyota-and-Lexus...dit-t18069.html, this thread's title is appropriate, unlike before.