Tax Credit fluxuates based on income???

cjmebm · 07-31-2006, 10:39 AM

I just purchased a 2006 super white package #6 prius... YAY!!!

I purchased on Saturday and today (Monday) called my salesman to ask about what I need to do to receive the 3150 tax credit (I did not know if there was a form I was supposed to receive or something).

He told me- the credit varies based on income and to call my accountant... Needless to say I was pretty angry that 1) this was not explained prior to the purchase and 2) that Toyota (or that specific dealership) could give me no more detail about the fluxuation beyond, "call your accountant, he'll know".

Any information people have on this would be greatly appreciated.
Thanks
Carly

sl7vk · 07-31-2006, 10:54 AM

<div class='quotetop'>QUOTE(CJmebm @ Jul 31 2006, 10:39 AM) [snapback]295072[/snapback]</div>

Quote:

I just purchased a 2006 super white package #6 prius... YAY!!!

I purchased on Saturday and today (Monday) called my salesman to ask about what I need to do to receive the 3150 tax credit (I did not know if there was a form I was supposed to receive or something).

He told me- the credit varies based on income and to call my accountant... Needless to say I was pretty angry that 1) this was not explained prior to the purchase and 2) that Toyota (or that specific dealership) could give me no more detail about the fluxuation beyond, "call your accountant, he'll know".
Any information people have on this would be greatly appreciated.
Thanks
Carly
[/b]

My understanding is that you get the full discount unless you run into the Alternative Minimum Tax..... I don't risk running into that anytime soon, and you probably don't either.

Also, if your federal tax liability is less then 3150 (i.e you aren't making much money), then there isn't 3150 to give back to you, and they'll give you back what you owe...

wstander · 07-31-2006, 11:01 AM

Check what the IRS site says at:

http://www.irs.gov/newsroom/article/...157632,00.html

As noted, the only limit would be that caused by AMT or business/commercial use of the vehicle.

richard schumacher · 07-31-2006, 01:52 PM

What they said. Remember that you're lucky if the salesanimal knows enough about the car he's trying to sell you, never mind tax law and regs.

rufaro · 07-31-2006, 03:39 PM

From a friend who previously hit the amt and bought a Cambrid this year...he said once you git there, it likely won't be a problem again, for THIS purchase anyway...but who knows? We hit it last year and are now keeping our fingers crossed.

You expect a CAR SALESWEEVIL to know/tell you honestly about ANY of this stuff if it might affect his/her bottom line????? <_<

tacomel · 07-31-2006, 04:17 PM

The tax credit does NOT fluctuate with income.

There is only minimal truth to what your salesman said, in that your eligibility to pay the AMT somewhat correlates to income. If you makes less than $62550 per year then you will not be subject to AMT, for sure. That's the amount for 2006 you can exempt from AMT consideration. If you make more than that, it depends on your deductions - certain things can be deducted under AMT (e.g. mortgage interest and charity) and some can't (e.g. personal exemptions, state taxes, property taxes, and of course, the Prius credit).

If you think there's a chance you'll be subject to AMT, see if a tax advisor in your area will give you a free consultation. I just gave one my 2005 return, said how I expected everything to change, added the Prius credit, etc.

Because WI has high income tax and high property tax, of the 2x$3150 I qualify for, I won't get to use about $1500 of it due to AMT. Your situation WILL vary.

NOTE: The $62550 assumes you're married filing jointly. Divide that by half if you're single.

Betelgeuse · 07-31-2006, 04:29 PM

<div class='quotetop'>QUOTE(Taco Mel @ Jul 31 2006, 04:17 PM) [snapback]295282[/snapback]</div>

Quote:

NOTE: The $62550 assumes you're married filing jointly. Divide that by half if you're single.
[/b]

The AMT kicks in at $31275 if you're single?! That seems like a really small amount, considering salaries these days. And it seems like most people who are going to be buying hybrids (i.e. those with enough money to buy something more than Corolla or a Civic) would run into this AMT problem.

tacomel · 07-31-2006, 04:36 PM

Nope - that's the exclusion amount, not the amount it kicks in at.

Basically, you figure your taxes two ways - the regular way (with Prius credit) and the AMT way. The AMT way is similar to the regular way except that you can't use certain deductions. When you're done figuring it the AMT way, then you subtract the exclusion amount from the final income you come up with.

Now, you figure your total tax. The regular way uses the progressive scale. The AMT way is 26% and at some point (so far above my income that I don't know) goes up to 28%. Note that at this point you subtract $3150 from your regular tax, but do NOT subtract it from the AMT.

Finally, compare the two. Technically, the AMT amount is the difference between tax figured the "AMT way" and the regular way, but practically, you end up paying the greater of the two.

See how confusing and complex and convoluted that is? That's why you should call your accountant (and congressperson).

sl7vk · 07-31-2006, 04:37 PM

I don't think AMT is run into by very many people. I'll make 6 figures this year, and granted my wife doesn't work, I won't be running into it. I have a small mortgage though, and very little charitable donations. Those of you living in states, like CT that have high taxation rates could hit this quicker then us in podunck states though... It's all very confusing.

Betelgeuse · 07-31-2006, 04:51 PM

<div class='quotetop'>QUOTE(Taco Mel @ Jul 31 2006, 04:36 PM) [snapback]295301[/snapback]</div>

Quote:

Nope - that's the exclusion amount, not the amount it kicks in at.

Basically, you figure your taxes two ways - the regular way (with Prius credit) and the AMT way. The AMT way is similar to the regular way except that you can't use certain deductions. When you're done figuring it the AMT way, then you subtract the exclusion amount from the final income you come up with.

Now, you figure your total tax. The regular way uses the progressive scale. The AMT way is 26% and at some point (so far above my income that I don't know) goes up to 28%. Note that at this point you subtract $3150 from your regular tax, but do NOT subtract it from the AMT.

Finally, compare the two. Technically, the AMT amount is the difference between tax figured the "AMT way" and the regular way, but practically, you end up paying the greater of the two.

See how confusing and complex and convoluted that is? That's why you should call your accountant (and congressperson).
[/b]

OK. I think I understand. So it's only the amount you make over $31K that you'd (potentially) pay the AMT on. Since the "regular" tax threshold is much lower than that, chances are that, if you make $50K, the total tax (i.e. in dollars) that you have to pay is more under the "regular" rules than under the AMT rules (even though the percentage is higher for the AMT).

This is why I use TurboTax

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07-31-2006, 10:39 AM	#1
cjmebm Join Date: Jul 2006 Posts: 5 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	I just purchased a 2006 super white package #6 prius... YAY!!! I purchased on Saturday and today (Monday) called my salesman to ask about what I need to do to receive the 3150 tax credit (I did not know if there was a form I was supposed to receive or something). He told me- the credit varies based on income and to call my accountant... Needless to say I was pretty angry that 1) this was not explained prior to the purchase and 2) that Toyota (or that specific dealership) could give me no more detail about the fluxuation beyond, "call your accountant, he'll know". Any information people have on this would be greatly appreciated. Thanks Carly

07-31-2006, 11:01 AM	#3
wstander Join Date: Jul 2005 Posts: 978 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	Check what the IRS site says at: http://www.irs.gov/newsroom/article/...157632,00.html As noted, the only limit would be that caused by AMT or business/commercial use of the vehicle.

07-31-2006, 01:52 PM	#4
richard schumacher ichorous liquor Join Date: Mar 2004 Location: United States Posts: 3,868 My Car: 2004 Prius Package: #6 Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	What they said. Remember that you're lucky if the salesanimal knows enough about the car he's trying to sell you, never mind tax law and regs.

07-31-2006, 03:39 PM	#5
rufaro WeePoo with WeePri Join Date: May 2006 Location: In a (Lo)California state of mind... Posts: 2,639 My Car: 2006 Prius Package: #3 Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 35	From a friend who previously hit the amt and bought a Cambrid this year...he said once you git there, it likely won't be a problem again, for THIS purchase anyway...but who knows? We hit it last year and are now keeping our fingers crossed. You expect a CAR SALESWEEVIL to know/tell you honestly about ANY of this stuff if it might affect his/her bottom line????? <_<

07-31-2006, 04:17 PM	#6
tacomel Join Date: May 2006 Posts: 152 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	The tax credit does NOT fluctuate with income. There is only minimal truth to what your salesman said, in that your eligibility to pay the AMT somewhat correlates to income. If you makes less than $62550 per year then you will not be subject to AMT, for sure. That's the amount for 2006 you can exempt from AMT consideration. If you make more than that, it depends on your deductions - certain things can be deducted under AMT (e.g. mortgage interest and charity) and some can't (e.g. personal exemptions, state taxes, property taxes, and of course, the Prius credit). If you think there's a chance you'll be subject to AMT, see if a tax advisor in your area will give you a free consultation. I just gave one my 2005 return, said how I expected everything to change, added the Prius credit, etc. Because WI has high income tax and high property tax, of the 2x$3150 I qualify for, I won't get to use about $1500 of it due to AMT. Your situation WILL vary. NOTE: The $62550 assumes you're married filing jointly. Divide that by half if you're single. __________________ His: 2006 #5, seaside pearl (Picture) Hers: 2006 #7, seaside pearl (Picture)

07-31-2006, 04:36 PM	#8
tacomel Join Date: May 2006 Posts: 152 My Car: Package: Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	Nope - that's the exclusion amount, not the amount it kicks in at. Basically, you figure your taxes two ways - the regular way (with Prius credit) and the AMT way. The AMT way is similar to the regular way except that you can't use certain deductions. When you're done figuring it the AMT way, then you subtract the exclusion amount from the final income you come up with. Now, you figure your total tax. The regular way uses the progressive scale. The AMT way is 26% and at some point (so far above my income that I don't know) goes up to 28%. Note that at this point you subtract $3150 from your regular tax, but do NOT subtract it from the AMT. Finally, compare the two. Technically, the AMT amount is the difference between tax figured the "AMT way" and the regular way, but practically, you end up paying the greater of the two. See how confusing and complex and convoluted that is? That's why you should call your accountant (and congressperson).

07-31-2006, 04:37 PM	#9
sl7vk Senior Member Join Date: Jul 2006 Posts: 362 My Car: 2006 Prius Package: #3 Nominated 0 Times in 0 Posts TOTM Awards: 0 Friends: 0	I don't think AMT is run into by very many people. I'll make 6 figures this year, and granted my wife doesn't work, I won't be running into it. I have a small mortgage though, and very little charitable donations. Those of you living in states, like CT that have high taxation rates could hit this quicker then us in podunck states though... It's all very confusing.