2006 Tax credit

<div class='quotetop'>QUOTE(jesart @ Jan 15 2007, 08:25 PM) [snapback]376118[/snapback]</div>

For tax year 2006 you should be able to claim the full credit. Form 8910 is only concerned with the purchase. You still owned the car and it was in service as of 12/31/06. We are still waiting for the 2006 version of this form.

As for 2007, who knows. Tax laws can still be passed and revenue rulings made that affect this part of the law. Right now, based on the information at hand you would qualify for the tax credit on the 2007 vehicle.

 

Yep, I have heard that the new form may be available by Feb from the IRS, but I can't say for certain. Either way if you bought the vehicle before the deadline you should be able to get the full credit. We will see in the next few weeks.

 

<div class='quotetop'>QUOTE(jesart @ Jan 15 2007, 08:25 PM) [snapback]376118[/snapback]</div>

When I was preparing our 2006 taxes yesterday I read about a recision if you have the vehicle for less than 3 years. So, I would research that if I were you.

 

<div class='quotetop'>QUOTE(Momma Mary @ Jan 16 2007, 06:41 PM) [snapback]376516[/snapback]</div>

Where did you read about the recision? IRB 2006-6 page 413 (dated Feb.6, 2006) states "...this notice does not address a number of rules (which) include preventing the credits from being used to reduce AMT liability ... and rules relating to recapture of the credit..."

 

I would be interested in an answer to the first question as well.

I am thinking about trading in the Prius in the very near future (a month or so) but am unsure as to if I would still be able to claim the 2006 $3150 tax credit when I prepare my taxes in a couple of weeks (I purchased the Prius right off the lot in April 2006).

 

<div class='quotetop'>QUOTE(JimN @ Jan 16 2007, 10:25 PM) [snapback]376614[/snapback]</div>

I think I got it from Pub 535 when I was reading about clean fuel vehicle property. I re-read it and realized it pertains to the old clean fuel deduction. In looking around for were I read that I found this:

Hybrid Tax Credit Strategies and Limitations
From William Perez, taxes.about.com

"Recapture: Penalty for Selling Your Hybrid Car Early
The new law for the hybrid tax credit requires taxpayers to recapture their hybrid tax credit if they re-sell their hybrid car or truck. Further details will be provided by the IRS when they issue regulations to interpret and implement this new tax law. For now, I would advise against selling, leasing, or giving hybrid cars away until we find out how long you have to keep the car. "

I guess we have to wait to know.
Hope this helps.

 

<div class='quotetop'>QUOTE(Kross @ Jan 18 2007, 08:31 AM) [snapback]377125[/snapback]</div>

This is purely my opinion. You are entitled to the credit in 2006 since you bought and put the car in service in 2006. IF there is a recapture rule it will take effect in a future year when a sale or trade takes place. Worst case is that you would have to return the entire credit taken in 2006 when the car is sold. This means your 2007 tax liability will be $3150 higher than normal.

There are other threads discussing the economics of selling a car "early". The consensus is that it is a bad deal for the seller. If you are happy with the car can you negotiate a new loan with a better rate to pay off the existing loan? Be careful that you aren't upside down in the loan. (You owe more than the car is worth.) If you are upside down there is no good way to come out.

Now my practical advice. Unless you are receiving all of your tax forms electronically you can't file your 2006 form 1040 for another two weeks. Wait for the IRS to issue the instructions and form for 2006. If you just can't wait then file without claiming the 2006 credit. Once the information you need is available you can file a form 1040X (amended return) and claim the credit if you wish. The IRS knows it needs to make the 2006 form and instructions available so I'll bet money they will be available around the end of the month.

Pet peeve time. Taxes aren't due until April 15. I don't understand why some people are in such a g-d hurry to file. (This includes my mother.) Wants to file even though she hasn't received all of her 2006 forms then has to file an amended return later. It just causes more work and aggravation (for both of us) compared to waiting for all the information.

 

JimN,

Thank you for your detailed response. I do plan on waiting to hear from the IRS before I file my taxes, but I just wanted to get a head-start on the research.

If I end up falling within the time limit for the credit recapture, I will not be trading my car in. That's about the long and short of it.

As far as the loan is concerned, I know exactly what you mean. Thankfully, I owe much less on the car than what it is worth, which is why if I traded it in for another that costs less, I would come out with lower payments.

I was on the phone with the IRS helpline last evening and the gentleman on the other side could not offer me any information as to the specifics of the recapture time limit for this particular tax credit either. However, he did put in a request for me and I am supposed to hear back from them within 10 business days with an answer. By then, I am hoping that IRS should already have all the official info/forms out for this tax season.

If not, I will be sure to return here and post what they tell me, for the benefit of all the forum users.

 

<div class='quotetop'>QUOTE(JimN @ Jan 18 2007, 11:10 PM) [snapback]377579[/snapback]</div>

That's easy. If you're getting a refund, the longer you wait to file, the longer the federal government gets to collect the interest on your money. Likewise, if you owe money, the longer you wait to file, the longer you get to collect the interest on that money that you have to pay.

Most people that are due the hybrid tax credit are likely anticipating a refund, so they want to file as soon as possible to get their money.

 

<div class='quotetop'>QUOTE(rudiger @ Jan 19 2007, 12:03 PM) [snapback]377739[/snapback]</div>

I echo that sentiment. As I wasn't sure if I was going to buy one, and didn't until September, I already had more withholding than I needed, so I'm going to get several thousand back, and I'd like to get it as soon as possible. If I were to owe money, I'd wait until April to file.

 

<div class='quotetop'>QUOTE(JimN @ Jan 18 2007, 11:10 PM) [snapback]377579[/snapback]</div>

I am in a GD hurry because I need the $3150. Last month my homeowner's ins. went up 70%. Everything except my income is going up. To some folks $3150 is a considerable sum of money.

 

Well, having one of my W2's today and started doing part of my return on Turbotax Online, I got to the section where it asked about if I bought an alternative vehicle during 2006 to which I answered yes. Then I gotten the message from the site that the Form 8910 is not available yet and that it should be available around 2/16/07. So I signed up for the email notification when that form will be available so then I will be able to finish my taxes. But since I gotten my Prius after the Sept deadline, I will only get half the credit which should reduce my taxable income.

Of course, to my advantage though, I can save all my info on Turbotax and then resume working on it later once all the final forms are available.

 

<div class='quotetop'>QUOTE(Hopeful Future Prius Owner @ Jan 19 2007, 07:36 PM) [snapback]378045[/snapback]</div>

Many thanks for this helpful post. I just installed TurboTax just a few minutes ago, to get the software and any available updates installed, get last year's tax information transferred over to this year's form, etc. But I didn't go any further since I had heard that the IRS form wasn't available. It's great to know that this is true, that there's a date that the form is supposed to be ready, and that I can proceed with filling out some of this year's tax return and then ask for an email notification from TurboTax.

I'm not in a huge hurry to get my taxes done, but I am concerned about hitting the AMT, and the sooner I know about that, the better.

 

If the attachment works here is the form from the IRS website

 

<div class='quotetop'>QUOTE(jshamonski @ Jan 20 2007, 02:00 PM) [snapback]378320[/snapback]</div>

No offense but it's been noted here scores of times that your link is to a 2005 form. The IRS does not have the 2006 form posted.

 

<div class='quotetop'>QUOTE(mootsman @ Jan 20 2007, 07:06 PM) [snapback]378363[/snapback]</div>

Then the fine folks at the IRS must be doing some seious future planning since all of the questions in the form refer to vehicles put in service in 2006. The instructions also explain what the cutoff dates are for the credit to redeuced to 50%.

 

Everybody keeps saying that the form 8910 is for 2005, which it DOES seem like it due to the obvious "2005" stamps everywhere on the form.

However, what I also noticed was that the form specifically refers to the Tax Credit for the vehicles. To the best of my knowledge, before 2006 there was no tax credit, but a Tax Deduction (Yes there is a big difference between the two). Detailed HERE you will see that before 2006, there was only a tax deduction for hybrid vehicles, and 2006 was when the Tax Credit was introduced in place of the deduction.

And since this controversial form 8910 (reading 2005 but applying to 2006 vehicles) clearly and specifically states "Tax Credit", that leads me to believe that it was created for this tax season, regardless of any mishaps in correctly specifying the year on it.

 

<div class='quotetop'>QUOTE(Kross @ Jan 21 2007, 01:15 PM) [snapback]378647[/snapback]</div>

I've never known the IRS rules to to be simple but this web page does help explain all the ins and outs of the tax credit.
http://www.irs.gov/newsroom/article/0,,id=157557,00.html

 

<div class='quotetop'>QUOTE(JimN @ Jan 18 2007, 11:10 PM) [snapback]377579[/snapback]</div>

You are guilty of assuming everyone's situation is similar to yours. In my case I have a daughter starting college next fall. Financial aid applications have a February 15th deadline and must include a cope of my 2006 tax year 1040.