$3100 Prius tax credit question.

Yes, that is the case, read this article that I posted earlier in this thread. He suggest having a relative buy the car who pays more taxes.

http://taxes.about.com/b/a/223279.htm

 

More than I wanted to know :blink: ...makes me think I should get a Prius next year and have my brother buy it and split the refund.

 

It IS a credit in as much as this is the way the government typically manages credits.
A credit comes off your tax liability dollar for dollar (with limits) rather than reducing your adjusted gross income like a deduction.

What some in this thread seem to be unhappy about is that the government definition of a credit does not match the much simpler definition they would like to use.

Keep in mind that it would not be in line with the philosophy of the current administration to be subsidizing the purchases of vehicles by the poor and/or elderly.

 

Thanks for the link mdmikemd!
I have added it to the Government_Incentives section of the Toyota_Prius_FAQ. B)

 

i can't believe this is causing us so many difficulties! There should be a very limited number of people who are losing the credit - people who have to deal with AMT (likely people with lots of money invested in their home, as I understand it) and people who make less than, say, *edited - removed an actual number. go with "people who make less money than could normally afford a 20k+ car*

I'm actually kind of surprised to see that so many people think that W-2s and what you give the government each check has anything to do with what you actually owe.

I really hope I don't end up spreading more misinformation, but I think i've got a decent handle on it. After the end of the year, your accountant adds up all the money that you made/reported, and then subtracts out the deductions. They then check the tables and assign you an amount that you owe the government BEFORE worrying about tax credits. This is simply based on what you made that year less deductions. Say, at that point, your tax liability is $15,000. They then deduct your credits from what you owe (if you bought a prius, it's about 3k) which means that your new tax liability, the amount that the government will take from you come hell or high water at the end of the year, is about 12,000. If you are like most, you were probably overpaying all along, and put in 16,000 over the span of 2006. They look at what you owe ($12,000) and how much you've paid ($16,000) and give you your normal $1000 refund, PLUS the refund for the $3000 prius credit.

If you know a tiny more about taxes, you can manipulate your withholdings to take a little less out each paycheck, so that you will actually save that $4000 over the course of the year, rather than waiting till a check in 2007. of course, if you know how to do that, you probably didn't need my above expanation =)

 

Really, I mean the tax code is so simple...

 

LOL, that wasn't what I meant =) The tax codes suck!

I was actually more surprised that it was an ISSUE for people - because most of us looking at a 20k+ car are going to have to pay taxes of >$3400 throughout the year. I didn't this year, actually, but I darn well HOPE I'll make it next year.

 

Remember, if you lower your weekly tax payments too much and owe more than $1000, you get hit with penalties. I remember a tax discussion once, where the ideal situation, is you end up owing the treasury about $500, then it becomes a situation where the govt loaned you $500 interest free for the year.

 

Actually, some people pay more in their weekly withholdings so they can get a big fat refund check. They look at it as forced savings even though they spend it when they get it to pay for all the Christmas presents they bought.

 

Yeah I know people like that.
Kinda dumb really.

 

Hey, I linked to that website...to think that something I did ended up on some form of Wikipedia...I'll remember this day for at least another day!

 

That would be me! It was by mistake though...and it took me 10 months to figure it out...we basically have paid double our state taxes and 33% extra in federal. So perhaps we'll go on the ski trip in March after all.

 

yep and i know one who will lose it...she was wavering on the purchase because it would be about $4-5000 more than another car she was looking at. i tried to explain that the credit will level the playing field.

now i have to tell her that its only a rich man's credit. or possibly will have to swing a deal to have her parents buy it for her. her parents were going to put in $15,000 on it. sooo have to ask this.

can the Prius credit be taken first before any other credits?

this is situation. single mother 2 kids. just started working about 4 months ago. will make about 10,000 this year, with tax return of about $3500 after head of household deduction and EIC.

in 2006, will make 18,000 give or take. will still have return of about $3000 PLUS everything she has paid in. probable tax liability BEFORE EIC would be around $2000...so could she get the $2000 in addition to the EIC??

to be honest with ya, she has no money... if the credits cant cover the entire cost of the car, i doubt that she will do it. as it is, that EIC is all she has every year to buy anything other than the bare necessities. she now drives a car that costs her $40 a week in gas...

geez... man this really pisses me off. i should have known better than to think that bush would give a dime to anyone outside his financial circle

 

I'd say tell her to go for her parents buying it. Again, I'm not sure about this, but I would guess they'd give her the EIC & Child Tax Credit first. If that gave her a negative tax burden(she gets all her taxes back + some extra from govt), I doubt buying a Prius would increase that negative tax burden.

 

I believe the short answer is "no".
Check with a tax expert to be sure.

 

Actually, I don't think thats a good idea either, if your brother buys the car then the title is in is name. He would have to gift it to you minus the $11,000 gift tax exclusion, you would be paying gift tax on the remainder which might nulify the benefits of the tax credit.

Unless you are added to the title as a co-owner using OR instead of AND, that way you can take your brother off the title without his signature as soon as you split the refund. This way no gifting is envoked, hence no gift tax.

Of course in either scenario, you are puting trust in your brother to give up claim in the ownership in the car...Is the tax credit really worth the hassle?

Maybe AND is the best way to go....that way he couldn't claim you stole the car from him since it would require both signature to change the title.

 

He could also sell it back to me for $1.