Tax Credit Question for 06 Prius

[matben]

How does it work exactly? When doing my taxes, do I have to owe at least $3100 in order to have the full credit kick and and knock my taxes to zero, or is it an actual credit so that if I owed $1200, I'd get a refund of the full credit minus the twelve hundred I owed? Any and all info on this question would be appreciated.

Matt

[fshagan]

<div class='quotetop'>QUOTE(matben @ Nov 30 2006, 03:12 PM) [snapback]355979[/snapback]</div>

How does it work exactly? When doing my taxes, do I have to owe at least $3100 in order to have the full credit kick and and knock my taxes to zero, or is it an actual credit so that if I owed $1200, I'd get a refund of the full credit minus the twelve hundred I owed? Any and all info on this question would be appreciated.

Matt
[/b]

It doesn't give you back more than you owe or have had deducted from your payroll throughout the year (your total tax liability). So you would have to have a total tax liability of $3,100 or more to get the full benefit of the tax credit. Someone did the math and posted the result here in one of the threads, and I can't remember the income level where you are paying that much in tax ... I think its something like $35,000, but I'm not sure. Check your pay stub and see how much Federal Income Tax has been withheld; we're close enough to the end of the year for you to see how much you have been paying.

[matben]

I had been hoping that was how it worked, but someone at work said it only kicks in if I owe beyond what had been taken out of my paycheck. I'd been assuming that as long as my Federally Withheld money on my stub came up to 3100, then that was what I'd get back. Thanks for your reply. You put my mind at ease.

Matt

[Syclone]

<div class='quotetop'>QUOTE(matben @ Nov 30 2006, 06:24 PM) [snapback]355986[/snapback]</div>

I had been hoping that was how it worked, but someone at work said it only kicks in if I owe beyond what had been taken out of my paycheck. I'd been assuming that as long as my Federally Withheld money on my stub came up to 3100, then that was what I'd get back. Thanks for your reply. You put my mind at ease.

Matt
[/b]

There could be a fly in the ointment. If the credit gets your taxes too low. There is something called the alternative minimum tax (AMT). I'm sure your accountant can tell you where you stand with that.

[Katznbooks]

I'm sorry. I'm being thick. I still don't get it. I know I pay less than $3100 in taxes per year. So how will my credit work? Do I get a refund check for the whole amount I've paid in taxes this year?

[sub3marathonman]

Here is how it works.

First, you calculate your taxes. You will either owe more than $3150 or less than $3150, no matter how much or how little was withheld from your paycheck. (You're still the one paying the IRS, even if it is withheld from your paycheck, but that's another story.)

Then you calculate all other deductions from your tax owed. This could put some that were initially owing more than $3150 back under the $3150 amount.

Then you can see about the Prius tax credit.

Obviously if you still owe more than $3150, the credit will reduce your taxes by $3150. Whether or not you receive a refund or still owe the IRS depends on how much withholding or estimated tax you paid.

Unfortunately, if you owe less than $3150 your tax liability will be reduced to $0, nothing more and nothing less. You won't get any added refund check, you can't carry it into the next year, it will vanish. So those people will get somewhere within the range of a $3150 credit all the way down to $0 credit, depending on what their tax liability is.

And then, after doing all these calculations, you get to go back, redo everything and see if you owe the Alternative Minimum Tax. That should keep you busy for hours and hours.

I think you should at least be able to carry the unused credit amount forward into the next tax year, as you can with other credits, but the rules don't allow it. It seems somewhat sneaky in my opinion.

And, if you've bought the Prius after 9/30/2006 all the calculations will be $1575 instead of $3150, because the credit is reduced by 50%. Eventually the credit will be reduced to $787.50, which is 25% of $3150, and then eliminated. But that won't be for awhile.

[Katznbooks]

Oh my. I feel like a complete imbecile. I really don't understand what you're saying. Is there no simple answer? I know I always pay less than $3150 in taxes, total, in a year. (I have a "modest" income.) Is it not possible to just say that I will get a refund check for the entire amount of taxes I've paid for the year?

[jtmhog]

<div class='quotetop'>QUOTE(Katz @ Dec 1 2006, 08:57 AM) [snapback]356155[/snapback]</div>

I'm sorry. I'm being thick. I still don't get it. I know I pay less than $3100 in taxes per year. So how will my credit work? Do I get a refund check for the whole amount I've paid in taxes this year?
[/b]

In order to get the full $3100 tax credit or tax reduction, you must have at least $3100 in tax liability or tax due. You fill out your tax form and arrive at a tax due amount. Say, your tax due amount is $2500; your $3100 credit will reduce your tax to zero; the remaining $600 disappears. Since it is a 2006 tax credit, you can't carry-over the $600 to 2007. As previously said, you have to figure your alternative minimum tax; you may owe tax there. There are many other threads on this subject.

[DaveinOlyWA]

yes, it is possible. if you owe less than 3150 in taxes, you will get it all back along with any amount deducted from your paycheck.

[Katznbooks]

<div class='quotetop'>QUOTE(DaveinOlyWA @ Dec 1 2006, 10:53 AM) [snapback]356195[/snapback]</div>

yes, it is possible. if you owe less than 3150 in taxes, you will get it all back along with any amount deducted from your paycheck.
[/b]

Bless you, my child! That's what I thought, but the language was getting too complicated.