Many angry Prius parents come tax time??

hi all... first time poster here!

I am now in the market for a new '06 prius, and I seriously considered the tax implications before going this far. I will also mention that I *have* talked to my accountant, and here's the scoop as he explained it to me:

the prius tax credit is put against money owed to the irs. so, in simple math, let's say that you made $100k per year. without deducting anything (children/house payments/etc), let's assume that you would owe (roughly) $25k in taxes. if you withheld money from your check every other week, you would have close to $30K in withholdings set aside for tax time. in that scenario, you would get a $5k refund.

with the credit, what you do is subtract the tax credit ($3,150) from the $25k owed, leaving you with a new total of $21,850 of taxes owed. now, the difference between the $30k in withholdings and the $21,850 is your refund for that year (in this example - $8,150).

Of course, this is all simple math, and when you start doing things like deducting for houses, children, school loans, etc., and/or you're not withholding anything from your check (or AMT/TMT), the math gets a lil' fuzzy, but the idea is the same. you don't just *get* the $3,150 regardless of your situation, but if you have more than 3,150 in taxes *owed*, you should get it.

please let me know if you've heard something different... it took me a while to get it, but it seems pretty straitforward now...

 

BlueBear you've pretty much got it right. It's the AMT issue that is confusing things here. It is relatively easy to calculate your regular tax amount but the AMT requires a more complex calculation.

 

Yeah. To me it just seems that anything which helps your tax situation (the tax credit for example) you should automatically figure out what your situation is. If you pay almost nothing in taxes clearly the credit will do nothing for you.

It's a tax CREDIT. Not cash.

The "average" family varies so much. It depends on what you make, your other deductions, etc. Two families each with 60k of income, married with 2 children can vary a lot if one family rents and the other pays mortgage on a 300k house. One family it would help a lot the other it would not as much.

I do think that people with kids pay wayy to little in taxes. It almost seems you can SAVE money with a kid they give you so much credit and deductions. (I’m just hating because I don't have kids)

People do these crazy calculations to see if they'll save money with the car. If you want to save money buy a kia rio, nothing will beat it. If you want to drive a prius buy one. There is no car to easily compare it to it being the only prius which does not have a "normal" version.