I'm Confused

[Shark]

I am in the process of completing the 8910 form. If for example, I make 60k a year and don't have to complete the Alternative Minimum Tax, Do I just complete the 1st 5 lines of the 8910 form? the instructions are rather confusing for what seems like a simple tax credit.

Does anyone have an example of a properly completed 8910 that was for personal use? It may help to see one to understand it better.

Thanks

[ksstathead]

Your credit is limited to the excess of your regular tax over your tentative minimum tax, so you cannot determine your credit without completing the 6251. Now the 6251 is doable, especially if you do not have preferential rate income like qualified dividends and long-term capital gain. Just take it step by step. It doesn't have to be perfect, but at your income I'd expect the result would be no further limitation of your credit.

In brief, the AMT will take taxable income before personal exemptions, add your standard deduction or your itemized deductions for taxes and miscellaneous deductions, take a huge AMT exemption off, and multiply by 26%. That's Tentative Minimum Tax in a simple case. Reply or PM me if you have questions.

[Shark]

Kastathead

Thanks for the reply. I will work on it again tonight and tomorrow and may take you up on your offer. I really appreciate your willingness to help.

[NoMoShocks]

Originally Posted by ksstathead

Your credit is limited to the excess of your regular tax over your tentative minimum tax, so you cannot determine your credit without completing the 6251. Now the 6251 is doable, especially if you do not have preferential rate income like qualified dividends and long-term capital gain. Just take it step by step. It doesn't have to be perfect, but at your income I'd expect the result would be no further limitation of your credit.

In brief, the AMT will take taxable income before personal exemptions, add your standard deduction or your itemized deductions for taxes and miscellaneous deductions, take a huge AMT exemption off, and multiply by 26%. That's Tentative Minimum Tax in a simple case. Reply or PM me if you have questions.

For crying out load! Who but the Federal Government would get away with making people prepare their own invoices first before they pay them. This discussion may help me too, becuase my Accountant says I can only get $500 of my credit, and inquiring minds want to know WHY? Apparenly the 8910 is disproportional to the 6251 which results in a discombobulation for the Confusionmost factor taking the whole process into a cloose loop temporal causality distortion of the time space contiueum.

[ksstathead]

Yeah, that's about it, NoMo.

Did your salesman fail to explain the AMT?

[Rae Vynn]

We use TurboTax, and it worked just fine.

Of course, our tax burden was more than the tax credit for buying a Prius, so the whole credit was taken off our burden. Yay!

[qbee42]

The short answer is that the credit is limited by the AMT calculation, even if you don't have to pay AMT. Say, for example, that you came within $1 of paying AMT, but didn't have to, so you might not even know how close you were unless you manually prepared your taxes. Now you go to take your Prius tax credit and discover you are only eligible for a $1 credit. It might not be exactly dollar for dollar, but that's the general idea.

Another place people get caught is not realizing that a credit will only reduce taxes. It cannot make money for you, so if your tax obligation is less than the amount of the credit, the credit will reduce your taxes to zero, but not to less than zero.

Tom

[Slartibartfast]

Originally Posted by qbee42

The short answer is that the credit is limited by the AMT calculation, even if you don't have to pay AMT. Say, for example, that you came within $1 of paying AMT, but didn't have to, so you might not even know how close you were unless you manually prepared your taxes. Now you go to take your Prius tax credit and discover you are only eligible for a $1 credit. It might not be exactly dollar for dollar, but that's the general idea.

Another place people get caught is not realizing that a credit will only reduce taxes. It cannot make money for you, so if your tax obligation is less than the amount of the credit, the credit will reduce your taxes to zero, but not to less than zero.

Tom

A general hint, though, in dealing with the AMT/TMT/

The key is to do everything you can (legally) to reduce AGI. This was my experience with 2006 taxes: If you're dealing with education expenses at the same time you're dealing with a hybrid tax credit, it's almost always better to take the education expenses as a deduction, especially if you're in the phaseout area of the credits. If you're in the Lifetime Learning credit phaseout area, you probably are also approaching AMT and your 8910 credit will shrink. In 2006, I qualified for a $1300 education credit (partial phaseout). But when I did my 8910, I only qualified for about $1500 for the Prius. I redid my taxes taking the $4000 tuition deduction instead. I lost $300 in education credit (25% bracket = $1000 credit), then was able to get a full $1000 more off the 8910, netting me $700. That's because the tuition deduction is not taken away in AMT calculations, but the tax credit is.