2006 Tax credit

[jesart]

Last year I purchased a 2006 before Sept 30th. Which would qualify me for the full tax credit of $3,150. My questions is, this year I trade in my 2006 for a 2007 Prius. Would I still be able to claim the $ 3,150 from last year on my 2006 tax return. Next year in 2007 I can claim the $1,575, right? Sorry about the confusion. I did some research on the IRS website and it states that only the original owner of the qualifying 2006 Hybrid vechicle can claim the credit. It doesn't really specify. I might need to talk to my tax advisor. Comments are appretiated?? Thank you.

[JimN]

<div class='quotetop'>QUOTE(jesart @ Jan 15 2007, 08:25 PM) [snapback]376118[/snapback]</div>

Last year I purchased a 2006 before Sept 30th. Which would qualify me for the full tax credit of $3,150. My questions is, this year I trade in my 2006 for a 2007 Prius. Would I still be able to claim the $ 3,150 from last year on my 2006 tax return. Next year in 2007 I can claim the $1,575, right? Sorry about the confusion. I did some research on the IRS website and it states that only the original owner of the qualifying 2006 Hybrid vechicle can claim the credit. It doesn't really specify. I might need to talk to my tax advisor. Comments are appretiated?? Thank you.
[/b]

For tax year 2006 you should be able to claim the full credit. Form 8910 is only concerned with the purchase. You still owned the car and it was in service as of 12/31/06. We are still waiting for the 2006 version of this form.

As for 2007, who knows. Tax laws can still be passed and revenue rulings made that affect this part of the law. Right now, based on the information at hand you would qualify for the tax credit on the 2007 vehicle.

[New Revelation]

Yep, I have heard that the new form may be available by Feb from the IRS, but I can't say for certain. Either way if you bought the vehicle before the deadline you should be able to get the full credit. We will see in the next few weeks.

[mncjudge]

<div class='quotetop'>QUOTE(jesart @ Jan 15 2007, 08:25 PM) [snapback]376118[/snapback]</div>

Last year I purchased a 2006 before Sept 30th. Which would qualify me for the full tax credit of $3,150. My questions is, this year I trade in my 2006 for a 2007 Prius. Would I still be able to claim the $ 3,150 from last year on my 2006 tax return. Next year in 2007 I can claim the $1,575, right? Sorry about the confusion. I did some research on the IRS website and it states that only the original owner of the qualifying 2006 Hybrid vechicle can claim the credit. It doesn't really specify. I might need to talk to my tax advisor. Comments are appretiated?? Thank you.
[/b]

When I was preparing our 2006 taxes yesterday I read about a recision if you have the vehicle for less than 3 years. So, I would research that if I were you.

[JimN]

<div class='quotetop'>QUOTE(Momma Mary @ Jan 16 2007, 06:41 PM) [snapback]376516[/snapback]</div>

When I was preparing our 2006 taxes yesterday I read about a recision if you have the vehicle for less than 3 years. So, I would research that if I were you.
[/b]

Where did you read about the recision? IRB 2006-6 page 413 (dated Feb.6, 2006) states "...this notice does not address a number of rules (which) include preventing the credits from being used to reduce AMT liability ... and rules relating to recapture of the credit..."

[Kross]

I would be interested in an answer to the first question as well.

I am thinking about trading in the Prius in the very near future (a month or so) but am unsure as to if I would still be able to claim the 2006 $3150 tax credit when I prepare my taxes in a couple of weeks (I purchased the Prius right off the lot in April 2006).

[mncjudge]

<div class='quotetop'>QUOTE(JimN @ Jan 16 2007, 10:25 PM) [snapback]376614[/snapback]</div>

Where did you read about the recision? IRB 2006-6 page 413 (dated Feb.6, 2006) states "...this notice does not address a number of rules (which) include preventing the credits from being used to reduce AMT liability ... and rules relating to recapture of the credit..."
[/b]

I think I got it from Pub 535 when I was reading about clean fuel vehicle property. I re-read it and realized it pertains to the old clean fuel deduction. In looking around for were I read that I found this:

Hybrid Tax Credit Strategies and Limitations
From William Perez, taxes.about.com

"Recapture: Penalty for Selling Your Hybrid Car Early
The new law for the hybrid tax credit requires taxpayers to recapture their hybrid tax credit if they re-sell their hybrid car or truck. 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 guess we have to wait to know.
Hope this helps.

[JimN]

<div class='quotetop'>QUOTE(Kross @ Jan 18 2007, 08:31 AM) [snapback]377125[/snapback]</div>

I would be interested in an answer to the first question as well.

I am thinking about trading in the Prius (for a car with lower payments, thanks to the impending wedding) in the very near future (a month or so) but am unsure as to if I would still be able to claim the 2006 $3150 tax credit when I prepare my taxes in a couple of weeks (I purchased the Prius right off the lot in April 2006).
[/b]

This is purely my opinion. You are entitled to the credit in 2006 since you bought and put the car in service in 2006. IF there is a recapture rule it will take effect in a future year when a sale or trade takes place. Worst case is that you would have to return the entire credit taken in 2006 when the car is sold. This means your 2007 tax liability will be $3150 higher than normal.

There are other threads discussing the economics of selling a car "early". The consensus is that it is a bad deal for the seller. If you are happy with the car can you negotiate a new loan with a better rate to pay off the existing loan? Be careful that you aren't upside down in the loan. (You owe more than the car is worth.) If you are upside down there is no good way to come out.

Now my practical advice. Unless you are receiving all of your tax forms electronically you can't file your 2006 form 1040 for another two weeks. Wait for the IRS to issue the instructions and form for 2006. If you just can't wait then file without claiming the 2006 credit. Once the information you need is available you can file a form 1040X (amended return) and claim the credit if you wish. The IRS knows it needs to make the 2006 form and instructions available so I'll bet money they will be available around the end of the month.

Pet peeve time. Taxes aren't due until April 15. I don't understand why some people are in such a g-d hurry to file. (This includes my mother.) Wants to file even though she hasn't received all of her 2006 forms then has to file an amended return later. It just causes more work and aggravation (for both of us) compared to waiting for all the information.

[Kross]

JimN,

Thank you for your detailed response. I do plan on waiting to hear from the IRS before I file my taxes, but I just wanted to get a head-start on the research.

If I end up falling within the time limit for the credit recapture, I will not be trading my car in. That's about the long and short of it.

As far as the loan is concerned, I know exactly what you mean. Thankfully, I owe much less on the car than what it is worth, which is why if I traded it in for another that costs less, I would come out with lower payments.

I was on the phone with the IRS helpline last evening and the gentleman on the other side could not offer me any information as to the specifics of the recapture time limit for this particular tax credit either. However, he did put in a request for me and I am supposed to hear back from them within 10 business days with an answer. By then, I am hoping that IRS should already have all the official info/forms out for this tax season.

If not, I will be sure to return here and post what they tell me, for the benefit of all the forum users.

[rudiger]

<div class='quotetop'>QUOTE(JimN @ Jan 18 2007, 11:10 PM) [snapback]377579[/snapback]</div>

Pet peeve time. Taxes aren't due until April 15. I don't understand why some people are in such a g-d hurry to file.[/b]

That's easy. If you're getting a refund, the longer you wait to file, the longer the federal government gets to collect the interest on your money. Likewise, if you owe money, the longer you wait to file, the longer you get to collect the interest on that money that you have to pay.

Most people that are due the hybrid tax credit are likely anticipating a refund, so they want to file as soon as possible to get their money.