Tax credit time limit?

Funny you'd bring it up... I just asked my accountant the same question. I bought mine in november (different tax break) but don't know if I'll keep the car, wanted to make sure I could still take the deduction. He's going to look into it, but as far as he knew you could own the car for only a day or two and still take the deduction.

 

I am in the middle of it now. I sold my 05 after one year. My tax man said that I needed to hold it for 3 years for the full 05 Tax deduction. This year I have claimed the full deduction and since I sold the car early in 06 I will have to declair that on next years taxes. Next year I will get the much better $3150 Tax credit to off set teh loss of 66% of the $2000 tax deduction.
Is that clear?
Warning this is not tax advice and I do not paly a tax man on TV,
Just what I did.

 

The vehicle is acquired for use or lease by the taxpayer, and not for resale. The new law for the hybrid tax credit requires taxpayers to recapture their hybrid tax credit if they re-sell their hybrid car. 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 would advise against selling, leasing, or giving hybrid cars away

I would have to agree on the giving away part.
On the other hand when I can sell my 05 for almost what I paid, and buy an 06 with $3150 from the feds, it is a no brainer................. SELL, SELL, SELL!

 

The OP was talking about his 2006, BTW.

 

i know for the 05 deduction, you had to keep it for 3 years. if you didn't, you had to do the whole recapture thing on your taxes the year you sell it. i'd imagine it's the same situation, or at least similar.

 

crap... yeah, the deduction ('05 rules) look like I might not be able to dump the car and still reap the tax benefits. We're working on it so I can take it anyhow based on mileage... especially since I haven't sold the car yet. But with gas prices skyrocketing it'd be a good time to unload the prius

 

Question: why unload it if gas prices are skyrocketing :blink: ...or do you own another Pirus or vehicle that is a SULEV/PZEV with great MPG?

 

I don't think the IRS has finalized this issue. I'm curious how the IRS would have any access to information regarding the sale of the Prius other than what the taxpayer volunteers. I wonder if the tax form will include some declaration requirement.

 

Umm... why would you go buy a brand new car and need to seel it a year later???? This does not make much sense to me... does it make sense to anyone else here??? :blink:

 

Things happen - health changes - job changes -size of family changes. There are any number of possibilities that can make the sell of a new/newer car essential.

 

From my reading of the rules (and I believe there are some earlier threads on this), you only have to do the recapture if you modify the car to make it not meet the clean-fuel requierments, or if you make it 'nonqualifying', which means selling it to a non-profit or someone who uses it predominatly for lodging (!), to someone outside the US, or to a government unit. It's based on a 'know or reason to know' standard - so if you're selling it to a dealer or private party who isn't a non-profit, it doesn't appear you have to recapture the deduction.

Policy-wise this makes sense, since it's not like the 2nd person can take a credit also, so the feds aren't paying out extra deductions for owner #2, and if you mod it or sell it to someone who couldn't take the credit in the first place then it's only fair to recapture it.

Here's the pub: IRS Pub 535