$3100 Prius tax credit question.

You're correct. I think everyone has an AMT and a normal tax, you just pay the higher of the two.

 

If you look a form 1040 you will see you figure your tax on one line, add the AMT tax on the next line and the totoal tax is these two lines added together (eg, lines 44 and 45 for the 2005 form 1040). After figuring this tax is when credits are subtracted, thus even if you pay AMT the hybrid credid for 2006 should still reduce your tax by 3K+

 

I have heard different answers from different people. Now, on last year's 1040, I wasn't eligible for a single credit and I was made ineligible due to my income for many. I paid foreign taxes on some investments & child care expenses. TurboTax "told" me I couldn't claim those credits. I've heard the same about the Hybrid credit.

I got this quote from a tax help site:

"Potential Disallowance of Credit under AMT Rules. Another issue is that you could lose all or part of your expected hybrid vehicle tax credit if you are subject to the alternative minimum tax (AMT)." :angry:

Anyway, I got the hybrid this year...maybe I should buy a Highlander in Jan...not! :angry:

 

It's actually not complicated.
The credit will not reduce the tax you must pay for the year below your AMT.
If you want to estimate your AMT, you can use the HRBlock.com - H&R Block 2005 AMT Estimator.

 

Which is what I believed...I'm sure I will pay AMT this year, won't bother with the calculator. I'll just wait for my W2 and plug it in to TTax.

 

If your 2006 taxes will be more than AMT + ~$500, you probably walked away from a nice chunk of change.
<_<

 

Okay, now I'm confused I'm not sure what you mean by that. The AMT is the amount above your "normal" tax. And what research I've done, shows that if you pay the AMT, you won't get the credit.

 

The credit will reduce your taxes by ~$3150 or down to your AMT.

If your AMT is $4000 and your tax liability is $5000, your tax liability will be reduced to $4000 (your AMT).

If your AMT is $4000 and your tax liability is $8000, your tax liability will be reduced to ~$4850 (by the entire amout of the credit).

 

Okay, I think I know what your saying...

However, I paid the AMT last year...and I have no reason to think I won't this year...and if I don't then I'll buy a Highlander in 06!

 

Oops. Color me dense!
Yes. You are correct.
I misunderstood your situation.
If your AMT is larger than your "norma" tax liability, you won't benefit from the credit at all.
Sorry for the confusion.

 

What if you have no AMT?

 

Everyone has an AMT value.
It's just $0 for lots of us.

 

Yea!... I didn't know if AMT was included in your normal tax, or if that term was separate...
I think we are on the same page..

 

Actually your not Windstrings. The quote of Kiloran's is from page #5 and you're on page #6 :lol:

 

Hey, do not assume you know anything about me. I am driving two cars with over 150k miles on each. I have not owned a new car in over 18 years. I worked two jobs for more years that I can to remember. My Dad worked two jobs and my mother one all my growing up life. No one GAVE them anything. They both did not even graduate High School.I worked my way through College and still had student loans to pay of at the end.

Throwing money at problems or giving things does not solve a problem. I did taxes for many years, and I think the EARNED INCOME TAX CREDIT is a wonderful program. It rewards people for their earned income.

Hey, I have always wanted a Mercedes, but I don't think anyone should give me enough to buy one. I am barely able to afford the Prius, WITH the tax credit. If I didn't have those Tax Credits, I would just not get it, probably going for a Civic ICE. Or maybe a used Toyota or Civic.

I have donated a car several years ago that a local org fixes up & donates to someone so they can get to work. It was no longer reliable enough for me to use daily, but I still see it around for local driving.

So lets no go there. <_<

 

Thanks for quoting me. B)

There are two kinds of tax credits. Most tax credits are "non-refundable," which means you have to use them or lose them in the same year that the credit applies. The hybrid car tax credit is a non-refundable credit. There are only two refundable credits, the Earned Income Credit and the Child Tax Credit. Those two credits can produce a tax refund that's greater than your paid-in taxes.

Some non-refundable tax credits allow carryovers or carrybacks. This has to be specified in the tax code. For example, the Adoption Tax Credit and the Foreign Tax Credit allow carryovers. What that means is that the unused portion of the tax credit can be moved forward to next year, and keeps moving forward if you don't use it up next year (etc.). Most carryovers have a limited number of years to use them up before they are lost.

Finally, tax credits reduce your regular tax liability (and sometimes your AMT tax liability if specified in the tax code). On the 2005 Form 1040, your regular income tax liability will be found on Line 44 (page 2). This is the regular income tax calculated after all your tax deductions. This regular income tax liability can be reduced, but not below zero, by the tax credits claimed on Lines 47 through 55. Line 57 (which calculates your tentative total tax liability cannot be below zero).

In other words, owing or getting a refund at the end of the year has nothing to do with the decision to buy a hybrid. You have to look at your tax liability. Since the hybrid tax credit won't start until 2006, you will need to estimate your 2006 tax liability. You can do this using Form W-4 or the worksheet for estimated payments. Your local tax professional should also be able to calculate your estimated 2006 taxes using his or her professional tax software. The question you need to ask is this: "What will be my estimated 2006 tax liability." If your tax liability will be LESS than the hybrid tax credit, you might consider accelerating income into 2006 (to boost your tax, and use up more of your tax credit), or having a family member or friend with higher taxes buy the car for you.

I know this is a complicated area of the tax code. I'm still struggling to understand all the ins and outs. I will be posting an interview with a PriceWaterhouse partner later in the week to explain the clean fuel deduction (for '05) and the hybrid tax credit (for '06).

Best wishes to you all.

William
the Tax Guide at taxes.about.com

 

Thanks William.
I look forward to reading your PW interview.
What are the tax implications of having someone else buy a car with your money?
(Sales tax, gift tax, ...)

 

dont turn this around towards you. my attack is against the us government for its ignorance of what this country truly needs. to withdraw the benefit of the tax credit to the people that need it most is STUPID. this crap about we dont give you anything unless you dont really need it is crap. the number of people who didnt pay taxes and are buying a new Prius are too small to make a real difference in the budget and wouldnt be noticed in the billions of dollars wasted on the rich anyway.

should you take offense?? ya if you are one of the 33% (or whatever it currently is. that number is grossly inflated anyway. no true republican would really approve of what bush is doing unless they are still hoping for a handout) that thinks bush is doing a wonderful job. or are you just saying ya because you feel its your patriotic duty to do so. you agree that its the way it should be and for that, i attack you. just because you were given nothing and made it, that is the way everyone should do it right?? well take a good hard look at where we are right now.

45% of the cars on the road right now are over 15 years old and contributing way more than their fair share of polution. an estimated 75% of those smokers are owned by the people in the lower middle income class or poorer. they drive these heaps because they cannot afford to buy a better car.

i suppose you support FEMA too right? what about the lawyer in Florida who bought a generator for $537 and got a reinbursement check from FEMA for over $800... agree with that??

all im saying is that a huge portion of the money the government spends is wasted people that dont need it and the poor just gets poorer, creating a drag on ALL OF US. here is a chance for someone to help themselves and that opportunity is blown again.

also, on the person i know that is thinking about a Prius. she is a 26 year old widowed mother of two who will have help from her parents to get this car. she has only been back in the work force for slightly less than a year. her current car only get 20 mpg and will not be able to handle the 50 mile RT she currently drives not to mention the fact that the cost of gas is killing her. her parents though are retired and its not looking like they will qualify for the entire tax credit either. they are not rich, but do have savings that they are willing to give her to help her get on her feet. sure, a cheaper car would be a solution, but lets face it, there is no car out there that will handle the commute and the family situation as well as a Prius. hopefully they will try to swing it either way...

 

Could you two take your fight outside. :mellow:

Getting back to the original post. The 2006 tax credit is what it is. No more, no less. We can argue over the politics all year and it won't solve anything (not in this forum anyway).

There is a range of incomes and financial situations that qualify for the full tax credit. Should lower incomes that also qualify for the earned income credit also fully qualify for the hybrid credit? Probably, I don't know. Should people with AMT liability also quality for the hybrid credit? Mmmm. Again, probably. Many are not 'rich'. (I'm not one of them by the way). Unfortunately there are alwayw inequities in the tax code.

There's lots of incentives and credits out there. Should we fight for more equitable ones. Certainly. Write your congressman.

We might as well take advantage of the few that we can. I have a modest retirement income. I will have to withdrawal a little of my IRA to have sufficient income to qualify for the entire credit. No problem, I get to make a 'tax free' withdrawal. Hey, I cannot remember the last time I was able to take a tax credit of any type. Tax deductions are meaningless for me. That's life. I have been shut out of many, many tax incentives, deductions, and credits.

I'm happy to get the hybrid tax credit. Not everyone will qualify. Many will.
Just be sure to carefully check your financial situation so you are not surprized at 2007 tax time!

 

Well I have no control over who gets it and who doesn't.
All I know is I am buying my car and if I get a credit great, if not oh well.

The credit is not my deciding factor, although it was mean't to be.
I'm not rich either, but I just want the car that much.

They try to make laws that are fair, but they never are to everybody... and many do better than fair as Dave pointed out.... of course he was talking about FEMA!.... what else is new?

They do need to put people in office with knowledge, experience, and a good track record.... good feelings is not enough.

I hope the girl can get her car ok....... that will be neat.