2006 Tax Credit - NOT!

I'm a long time Prius driver (fun to say that!). I originally owned a 2002. In January of 2006, I looked at the new federal tax credits and realized that I could upgrade to a NEW 2006 Prius, for very little money.

When I bought by 2002 Prius, the feds had a $2000 tax deduction, plus an Oregon tax credit of $1500, which netted me around $2100 off the sticker price. But in 2006, the federal deduction increased to a $3150 tax CREDIT! Add that to the $1500 Oregon tax credit, and the fact that used Prii have held their value so well, and I figured I would be CRAZY not to buy a new Prius. I was essentially getting 3 years of use of my car for virtually nothing! Or so I thought...

What I didn't realize fully was that the federal hybrid tax credit was limited based on the alternative minimum tax! :angry: I read everything that was available online, including the limited info that was on the IRS website BEFORE I bought the car, and thought I had a pretty good handle on things. But I never saw anything about the AMT affecting reducing the hybrid tax credit until I fired up TurboTax and started entering my taxes this year.

Now, don't get me wrong... I'm not rich, but I've done well enough for myself to be able to afford to buy a Prius. And I'm no anti-tax activist... I'm happy to pay my share for the services I get from my government. But it would seem to me that the PURPOSE of this kind of a tax credit would be to get people like me who can afford to be early adopters, to buy a hybrid instead of an SUV!

My total tax bill this year will actually be more than the sticker price for my Prius... so it is kind of frustrating to see that my $3150 "reward" for doing what I firmly believe is the "right thing" is being reduced to virtually nothing.

Sigh... At least the Oregon $1500 credit is NOT reduced in this way!

Anyone else in the same boat?

 

You guys must make a high enough income to be affected by the AMT....in my case I don't make that high level of income so I was not affected by the AMT. When I did my taxes in TT I am going to get a nice amount back, and I had bought my car after the Sept deadline.

 

I haven't finished our taxes in TurboTax - it still gives me a message that the form needed for the Prius will be available on the 16th. But I got far enough to see that I get the full credit, and was VERY relieved to have TT tell me that the AMT does not apply to us this year. I was afraid it would - my salary and my wife's salary both went up, and I thought we were getting close to hitting the AMT, but - thankfully - we're OK for another year.

Like jrlittlejr, we didn't know anything about the AMT when we bought the Prius. In truth, we probably would have bought the Prius anyway (although we may have checked out the Civic hybrid as well), but the tax credit was enough icing on the cake to make the Prius purchase very easy to do. Then, I started to read here on PriusChat about the impact the AMT could have on the tax credit, and I started to sweat.

I don't think it's right for the AMT to have this kind of impact on a tax credit that is supposed to help people do the right thing. And writing to your representative is a good idea - they need to get a handle on the AMT before a lot more of us "ordinary folk" are caught up in it.

 

We bought a Prius in February, 2006, expecting to get the full credit. I lost my job in August and chose to take early retirement. We normally would not be anywhere close to the AMT threshhold. Because of my retirement, we elected to buy some property in preparation for a move to another state. This required us to cash out quite a bit of stock. The result: the increased taxable income for this year triggered the AMT and will eliminate our credit. Poor planning on our part, I guess.

Still, a great car.

 

<div class='quotetop'>QUOTE(Hopeful Future Prius Owner @ Feb 5 2007, 06:10 AM) [snapback]385457[/snapback]</div>

Just so that everybody is clear, you don't have to owe AMT in order for the tax credit to be affected. If your regular tax liability minus your TMT (tentative minimum tax) less than the amount of the credit, you will be affected.

Let's say you bought in time for the $3150 credit. If your regular tax liability is $8000 and your TMT is $3500, the difference is $4500 (which is greater than the credit) and you can take the whole credit. If your regular tax liability is $7650 and your TMT is $3500, the difference is $3150, the difference is $3150 (which is equal to the credit) and you can take exactly $3150 in credit. If your regular tax liability is $6000 and your TMT is $3500, the difference is $2500 (which is less than the credit), and you can take $2500 in credit.

 

It IS time congress revised AMT. Years ago it was a good idea to make those with lots of deductions and over a certain income pay at least a MINIMUM tax. Unfortunately, AMT has not been indexed, and wages have risen thereby trapping more unsuspecting people in it's trap. IMHO AMT concept is worth keeping, but the tax needs to be overhauled to reflect today's reality. Time to write letters to your congressperson.

 

<div class='quotetop'>QUOTE(jrlittlejr @ Feb 5 2007, 02:24 AM) [snapback]385442[/snapback]</div>

I'm in two of the same boats. When I bought my Prius, I was unaware of the AMT snag. Also, there were articles in the NY papers stating there was a bill proposing a NY tax credit of $2000 and a NY HOV. Then there follow-up articles stating the bill passed. What they did NOT say was that only the portion of the bill relating to the HOV lane passed.

I usually figure my paycheck deductions so I break even. Not wanting to give the government a 5k interest free loan, I had 5k less taken out in taxes during 2006. My tax bill is not going to look pretty.

 

<div class='quotetop'>QUOTE(bsd43 @ Feb 4 2007, 09:24 PM) [snapback]385642[/snapback]</div>

I was hoping this was not the case. You see, I am not able to use the entire credit, not because I made enough to worry about the AMT, but rather because I am a college student and did not have a great enough tax burden to need it. However, that will all change come tax time next year, and I was hoping that the remainder of my credit would carry over. Apparantly, this is not the case.

I do wonder if it is possible for my SO to use the rest of the credit, as her name also appears on the title. Anyone?

 

That sucks guys, Ill find out at the end of this year as to what i will end up with.

 

<div class='quotetop'>QUOTE(GreenGene @ Feb 5 2007, 07:37 AM) [snapback]385459[/snapback]</div>

Same here, i get the message about the form not being ready until Feb 16th, so I was a bit surprised by the top two posts on this thread.

BTW, where in TurboTax does it tell you if AMT applies to you or not? I've searched though it a bit and don't see where it says this. The help file isn't so helpful on this.

 

<div class='quotetop'>QUOTE(snowcrash74 @ Feb 5 2007, 08:34 PM) [snapback]385812[/snapback]</div>

Open up your return, and click on the "Federal Review" tab at the top. It will list four items that the review includes, and AMT is there. In fact, when I click on "Continue" on that screen, the first thing to pop up is the check for the AMT. Just about the nicest words I've seen when preparing my taxes: "Based on your information so far, you don't have to pay the Alternative Minimum Tax."

 

Thanks GreenGene, I see the same message. This is looking promising so far.

 

Alas, looks like I'll be getting only about $1000 of my available $3150 credit.

Oh well.

But I haven't done my Colorado state taxes yet, I don't think there is any kind of AMT/TMT/ScrewYouOverT with respect to the Colorado credit.

 

I called my tax guy last November and asked him what to do (prior to buying the car) to make the most of the tax credit. He said to claim the credit on my partner's return rather than mine (car is in both names) since his income is lower for 2006. If we could file "jointly" we would probably not get the credit at all, but our wonderful laws don't recognize us yet as a tax paying couple...

 

<div class='quotetop'>QUOTE(scoot @ Feb 6 2007, 11:18 AM) [snapback]386061[/snapback]</div>

So what are you complaining about? Maybe this belongs in Fred's house of pancakes...

 

<div class='quotetop'>QUOTE(snowcrash74 @ Feb 5 2007, 08:34 PM) [snapback]385812[/snapback]</div>

I used TT online and it had said the same thing. Then after reading posts about the form being available on TT, I revisited and found I could complete it. But TT can't file it until Feb 16th when its official.

I'm retired now and just take the standard deductions so the ATM didn't effect us. Even when I made more and itemized, they didn't have all the things you can claim now, which probably triggers ATM sooner.

 

<div class='quotetop'>QUOTE(ewhanley @ Feb 5 2007, 05:37 PM) [snapback]385730[/snapback]</div>

If her name is on the sales contract and title then it is her car as much as yours. Form 8910 doesn't ask how much of the vehicle you own. As long as only one credit per vehicle is being claimed I don't see an objection to whose 1040 form takes advantage of the credit. This presumes both are filing single returns.

If your intention is to split the credit between both returns keep in mind that the IRS knows how much to expect. Claiming an unexpected amount will likely trigger a notice disallowing the credit leading to possible penalties and interest on the unpaid tax. You will then have to defend your position to the IRS. Good luck.