2006 Tax Credit - NOT!

[km5er]

Yep me too....I get zip. I even made a deal to wait till Jan.3 to get the car so I could get the credit. Now after the fact the rules are changed and AMT forces me to get zip. I am getting sick of being taxed to death.

[JimN]

<div class='quotetop'>QUOTE(Jonathan @ Apr 16 2007, 01:17 PM) [snapback]424094[/snapback]</div>

Well, just to vent... I traded my 04 for an 06 also 'hoping' for $3150 back. But alas, my total tax was only $455 (thanks Time Warner stock-loss). On top of that, I can't figure out the f@#$ing forms to amend my return (filed online without entering Prius info) so I am giving that 455 to govt. Cant' tell you how frustrated/pissed I am right now about the whole thing (mostly my inability to understand the forms) I'm a commercially rated, instrument pilot, retired (recovering) Air traffic Controller yet I go cross-eyed looking at these forms. Sorry for the rant. Good luck all!
[/b]

Jonathan, Go to www.taxact.com and download their free program. Fill in all the information and print out a complete 2006 1040 form which will include the 6251 (AMT) and 8910 (Hybrid Credit). Go to www.irs.gov and download a 1040X (amended return). On the 1040X plug in the numbers from your original 1040 and add the hybrid credit. I think it is on line 7 1040X but check one of my recent posts. Next file the 1040X with the 6251 and 8910 that taxact completed. I don't know of an easier way. Hope this helps.

<div class='quotetop'>QUOTE(haceaton @ Apr 16 2007, 12:41 PM) [snapback]424072[/snapback]</div>

I think there is a lot of confusion on this board regarding the AMT. Many people who are not subject to the AMT will have their Prius tax credit reduced by an amount that is derived with the use of the AMT form 6251. For incomes as low as $62,550 for a married couple this could start to affect you. That is "rich" by world standards and even relatively well off for much of America, but I don't think many people consider that to be truely rich.

That aside I have found a nasty glitch (that affects me) with the Prius tax credit that potentially harms (or helps!) anyone who had their credit reduced by the AMT form. I ended up overpaying my State income tax this year by a little over $1,000. I am not subject to AMT, but the my credit was reduced by the formula used on the AMT form 6251. Because the state income taxes are irrelevant to the answer on line 33 of form 6251, it doesn't make any difference to my final tax bill whether I over or under paid my state tax. If I had paid the correct amount of state tax, my Prius credit would have gone up by the same amount that my before-credits tax amount went up, resulting in the same final tax amount for this year.

However, next year I will have to report that tax refund as taxable income. If I actually were subject to the AMT, it would get removed again in the AMT form, so it would not be an issue. However since I am not subject to the AMT, there is no mechanism to exclude it from my taxable income and next year I will pay tax on the refund.

Similarly if someone in my situation had underpaid their state taxes and had to write a check at year end, they would gain because some of that state tax would be shifted to next year where it would not reduce the Prius tax credit, but will reduce their income (assuming that they itemize).

Bottom line, over paying or under paying the state tax this year has zero effect on my final federal taxes this year, but that fact that I overpaid will raise my taxes due next year. If I had underpaid it would have lowered my taxes next year.

It's completely unfair, but that is the situation.
[/b]

Haceaton, For 2006 instead of claiming the amount of state tax that was deducted why not claim the actual state tax liability? As an example, if you paid $3000 but owed $2000, claim the $2000. For 2007 you will not have to declare the refund as income.

[haceaton]

<div class='quotetop'>QUOTE(JimN @ Apr 16 2007, 08:50 PM) [snapback]424324[/snapback]</div>

For 2006 instead of claiming the amount of state tax that was deducted why not claim the actual state tax liability? As an example, if you paid $3000 but owed $2000, claim the $2000. For 2007 you will not have to declare the refund as income.
[/b]

The instructions for Schedule A do not seem to allow discretion to reduce the amount reported this tax year.
I did however do some further research and found that Publication 525 indicates that "if your tax, after applications of the credits, does not change, you did not have a tax benefit from the deduction. Do not include the recovery in your income." So it appears that I will be able to exclude the state tax refund from next year's 1040.

Interestingly it still seems that anyone in my "tenative minimum tax" situation who underwitheld their state tax will get an additional benefit next year. Pity I'm not one of them.

[Jonathan]

<div class='quotetop'>QUOTE(JimN @ Apr 16 2007, 08:50 PM) [snapback]424324[/snapback]</div>

Jonathan, Go to www.taxact.com and download their free program. Fill in all the information and print out a complete 2006 1040 form which will include the 6251 (AMT) and 8910 (Hybrid Credit). Go to www.irs.gov and download a 1040X (amended return). On the 1040X plug in the numbers from your original 1040 and add the hybrid credit. I think it is on line 7 1040X but check one of my recent posts. Next file the 1040X with the 6251 and 8910 that taxact completed. I don't know of an easier way. Hope this helps.
Haceaton, For 2006 instead of claiming the amount of state tax that was deducted why not claim the actual state tax liability? As an example, if you paid $3000 but owed $2000, claim the $2000. For 2007 you will not have to declare the refund as income.
[/b]

Jim, thanks for the ideas. I can't bear the thought of filling in any more forms. i've already filed online at a site that didn't have my state, so I did it all over again at another site to do state. I have downloaded the 6251, 8910 and 1040x. All I can do is stare at them.

(added hour later) Just found out that since I've filed (already have refund) I can wait and do the 1040x after all the excitement of the 17th is over. Will probably take it to have done somewhere. Thanks for all the suggestions. Jon

[Devil's Advocate]

Keep voting for people who want more taxes and that's what you get, more taxes and the AMT!!!!!
MUUUU HAHAHAHAHAHAHAH

[JimN]

<div class='quotetop'>QUOTE(Jonathan @ Apr 17 2007, 01:02 PM) [snapback]424731[/snapback]</div>

(added hour later) Just found out that since I've filed (already have refund) I can wait and do the 1040x after all the excitement of the 17th is over. Will probably take it to have done somewhere. Thanks for all the suggestions. Jon
[/b]

You have 3 years to file that amended return.

[fshagan]

<div class='quotetop'>QUOTE(haceaton @ Apr 16 2007, 02:16 PM) [snapback]424268[/snapback]</div>

With an AGI of 109k, you did not trigger the AMT, but you certainly still needed to file form 6251 (a value from line 33 of this form goes on the Form 8910 line 16 for figuring your prius credit). When you fill out form 6251 you will be adding back at least all of the deductions you had from state income taxes, state sales taxes, property taxes, and all of your exemptions too. The result makes you pay taxes on more of your AGI than "regular" taxes would and the Prius tax credit is reduced such that you effectvely pay the "tenative minimum tax". With an AGI of $109k, your Prius credit will likely be reduced even if you use the standard deduction. If you took the full $3150 credit with an AGI of $109k it is extremely likely that you made a mistake on your taxes. Don't worry, the IRS will be explaining your error to you!

The original poster was complaining because California has a high state income tax which is normally deducted from taxable income, but the hybrid vehicle tax credit is reduced by an amount that is effectively equivalent to elliminating the state tax deduction (and then some). The original poster was likely not affected by the AMT, it is just the AMT form that is used to compute how much your tax credit is reduced.
[/b]

Nope, owed 0 on Form 6251 (still had to file it, I guess, but there's a zero in there). I used TaxCut, and didn't go through each form line by line ... so we'll see if the program has an error in it. Line 44 taxes were $13,253, and the full $3,150 was deducted from that, for a net tax liability of just over $10k. But I didn't overpay my California taxes this year in withholding (in fact, I owed California tax), so I didn't run into his problem.

[windstrings]

<div class='quotetop'>QUOTE(ohgreys @ Feb 5 2007, 10:52 AM) [snapback]385540[/snapback]</div>

Just so that everybody is clear, you don't have to owe AMT in order for the tax credit to be affected. If your regular tax liability minus your TMT (tentative minimum tax) less than the amount of the credit, you will be affected.

Let's say you bought in time for the $3150 credit. If your regular tax liability is $8000 and your TMT is $3500, the difference is $4500 (which is greater than the credit) and you can take the whole credit. If your regular tax liability is $7650 and your TMT is $3500, the difference is $3150, the difference is $3150 (which is equal to the credit) and you can take exactly $3150 in credit. If your regular tax liability is $6000 and your TMT is $3500, the difference is $2500 (which is less than the credit), and you can take $2500 in credit. [/b]

that must be what got me for filling for 'two" prius's... I got the first one, but the second was very little.