2006 Tax Credit - NOT!

[bsd43]

Actually, in a way, this is WORSE than paying the AMT itself. At least you have 10 more tax years to carryover and reclaim AMT paid.

You can't carry over the tax credit to future years.

[jrlittlejr]

I'm a long time Prius driver (fun to say that!). I originally owned a 2002. In January of 2006, I looked at the new federal tax credits and realized that I could upgrade to a NEW 2006 Prius, for very little money.

When I bought by 2002 Prius, the feds had a $2000 tax deduction, plus an Oregon tax credit of $1500, which netted me around $2100 off the sticker price. But in 2006, the federal deduction increased to a $3150 tax CREDIT! Add that to the $1500 Oregon tax credit, and the fact that used Prii have held their value so well, and I figured I would be CRAZY not to buy a new Prius. I was essentially getting 3 years of use of my car for virtually nothing! Or so I thought...

What I didn't realize fully was that the federal hybrid tax credit was limited based on the alternative minimum tax! I read everything that was available online, including the limited info that was on the IRS website BEFORE I bought the car, and thought I had a pretty good handle on things. But I never saw anything about the AMT affecting reducing the hybrid tax credit until I fired up TurboTax and started entering my taxes this year.

Now, don't get me wrong... I'm not rich, but I've done well enough for myself to be able to afford to buy a Prius. And I'm no anti-tax activist... I'm happy to pay my share for the services I get from my government. But it would seem to me that the PURPOSE of this kind of a tax credit would be to get people like me who can afford to be early adopters, to buy a hybrid instead of an SUV!

My total tax bill this year will actually be more than the sticker price for my Prius... so it is kind of frustrating to see that my $3150 "reward" for doing what I firmly believe is the "right thing" is being reduced to virtually nothing.

Sigh... At least the Oregon $1500 credit is NOT reduced in this way!

Anyone else in the same boat?

[bsd43]

Yup, I just did my Turbotax data entry too. I'm pretty pi$$ed off. Looks like the $3150 is going to be only $1000 when it's all said and done, because you must pay at least the Alternative Minimum Tax amount. I had previously thought (through reading irs.gov) that as long as you did not owe the Alternative Minimum Tax, that you can take the full credit.

This is lame, and I will write my Congress people. You should too.

[New Revelation]

You guys must make a high enough income to be affected by the AMT....in my case I don't make that high level of income so I was not affected by the AMT. When I did my taxes in TT I am going to get a nice amount back, and I had bought my car after the Sept deadline.

[GreenGene]

I haven't finished our taxes in TurboTax - it still gives me a message that the form needed for the Prius will be available on the 16th. But I got far enough to see that I get the full credit, and was VERY relieved to have TT tell me that the AMT does not apply to us this year. I was afraid it would - my salary and my wife's salary both went up, and I thought we were getting close to hitting the AMT, but - thankfully - we're OK for another year.

Like jrlittlejr, we didn't know anything about the AMT when we bought the Prius. In truth, we probably would have bought the Prius anyway (although we may have checked out the Civic hybrid as well), but the tax credit was enough icing on the cake to make the Prius purchase very easy to do. Then, I started to read here on PriusChat about the impact the AMT could have on the tax credit, and I started to sweat.

I don't think it's right for the AMT to have this kind of impact on a tax credit that is supposed to help people do the right thing. And writing to your representative is a good idea - they need to get a handle on the AMT before a lot more of us "ordinary folk" are caught up in it.

[rdenneyutmb]

We bought a Prius in February, 2006, expecting to get the full credit. I lost my job in August and chose to take early retirement. We normally would not be anywhere close to the AMT threshhold. Because of my retirement, we elected to buy some property in preparation for a move to another state. This required us to cash out quite a bit of stock. The result: the increased taxable income for this year triggered the AMT and will eliminate our credit. Poor planning on our part, I guess.

Still, a great car.

[ohgreys]

<div class='quotetop'>QUOTE(Hopeful Future Prius Owner @ Feb 5 2007, 06:10 AM) [snapback]385457[/snapback]</div>

You guys must make a high enough income to be affected by the AMT....in my case I don't make that high level of income so I was not affected by the AMT. When I did my taxes in TT I am going to get a nice amount back, and I had bought my car after the Sept deadline.
[/b]

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.

[MarinJohn]

It IS time congress revised AMT. Years ago it was a good idea to make those with lots of deductions and over a certain income pay at least a MINIMUM tax. Unfortunately, AMT has not been indexed, and wages have risen thereby trapping more unsuspecting people in it's trap. IMHO AMT concept is worth keeping, but the tax needs to be overhauled to reflect today's reality. Time to write letters to your congressperson.

[Amyshubby]

<div class='quotetop'>QUOTE(jrlittlejr @ Feb 5 2007, 02:24 AM) [snapback]385442[/snapback]</div>

Anyone else in the same boat?
[/b]

I'm in two of the same boats. When I bought my Prius, I was unaware of the AMT snag. Also, there were articles in the NY papers stating there was a bill proposing a NY tax credit of $2000 and a NY HOV. Then there follow-up articles stating the bill passed. What they did NOT say was that only the portion of the bill relating to the HOV lane passed.

I usually figure my paycheck deductions so I break even. Not wanting to give the government a 5k interest free loan, I had 5k less taken out in taxes during 2006. My tax bill is not going to look pretty.

[ewhanley]

<div class='quotetop'>QUOTE(bsd43 @ Feb 4 2007, 09:24 PM) [snapback]385642[/snapback]</div>

You can't carry over the tax credit to future years.
[/b]

I was hoping this was not the case. You see, I am not able to use the entire credit, not because I made enough to worry about the AMT, but rather because I am a college student and did not have a great enough tax burden to need it. However, that will all change come tax time next year, and I was hoping that the remainder of my credit would carry over. Apparantly, this is not the case.

I do wonder if it is possible for my SO to use the rest of the credit, as her name also appears on the title. Anyone?