Government gives hybrid buyers raw deal on tax bre

And now Toyota has suspended Prius sales to the US government. I'm wondering if the two aren't connected.

 

:blink: No. Toyota suspended FLEET sales.

 

thanks for the link. US tax law way different than here!

 

My take on this issue is somewhere along the line that Lewis Black mentioned on his HBO special. That is, we have two parties; one is the party of bad ideas and the other is the party of no ideas. One will stand up and proclaim 'I have a really bad idea!' and the other will stand up and proclaim 'And I can make it even sh*tt*er!' No idea actually makes it through the Washington crap machine without getting mangled in such a way that it doesn't even resemble what it originally went in as. Once they get done debating the dickens out of it, inserting their loopholes and take care of their pork constituency, what we have is a confusing, unworkable, unrealistic piece of legislation that isn't worth the paper it's printed on. There isn't a hidden agenda at work, just a bureaucracy that can't find it's backside with both hands unless they first form a committee and debate it for a few years.

 

San Fran Chronicle Article


It's from a few months ago, but well written on explaining the Tax Credit Program.

 

I'm no tax pro, but I don't see how a deduction (unless it is substantially greater in amount, which it is not) is ever better than a credit. A credit reduces your tax dollar for dollar, and a deduction will only reduce your tax for cents on the dollar (the larger your tax bracket, the greater the reduction, but still substantially less than a whole dollar).

As far as "what if you owe less than $3500 to begin with", it's the same as if the tax withdrawn from your paycheck exceeds what you owe -- the IRS sends you a check.

I'm still confused as to why this thread is named as it is... as I see it, it's not a raw deal but a rare opportunity to take advantage of a pretty substantial incentive (possibly compensating for the lack of incentive that you'll find at the dealership )

 

giertsen . . . I agree!

 

Sure, you're earning $45,000 a year and would normally owe about 15% of that in federal income tax but have other deductions and credits that bring your total tax liability down to just $2,000. Your Prius tax credit, even if its $3150, can only take you to zero. There is at least one tax credit that gives you money back even if you don't owe any taxes (the Earned Income Tax Credit). But the energy tax credit, as I understand it, will not let you get more back than you owe.

I also don't see the value of taking the deduction rather than the credit, except of course if you consider the "time value of money" and decide the ~$600 you would realize in early 2006 with the deduction taken now is worth more than the ~$3,100 you would realize in early 2007 with the tax credit.

 

Actually, with a little effort and planning, the tax credit can be realized at ~$800 per quarter beginning April 2006.
http://priuschat.com/2006-Tax-Credit-Strategy-t11911.html

 

My deductions are considerable. I use my car for business (about 20,000 miles annually), and the federal mileage rate gives me a huge deduction. So for me, waiting a year to get the credit would be worth only about $400 more than taking the deduction now. And the money I'm saving in gas now more than makes up for that difference.

 

Yes, but here's the problem with that approach:

If you over-deduct during the year, then you owe the tax and possibly a penalty. Been there, done that!

 

Certainly anyone who is worried that they might be approaching the AMT cutoff should consult with a tax planner.
However, if you know you're going to get $3150 in credit and you reduce witholding by $800 per quarter, you should end up at almost exactly the same place with respect to withholding vs. tax owed.