Just a warning about the tax credit. It is only available for the year that the car is placed in service. If you are subject to AMT (alternate minimum tax), you are not permitted to take the credit. I found this out the hard way with my 2006 Prius that I purchased in June 2006 with the understanding that it would qualify. I called the Complex Law Division at the IRS to inquire further after trying to get TaxCut to provide the credit when I filed my 2006 taxes. They confirmed that there is no credit if you have even $1 of AMT--and there is no carry over should you not have AMT in the subsequent year. The credit provision has not changed this year.
There is more to it than that. Even if you don't pay AMT, the AMT calculations limit the amount of your credit. For example, let's say you don't pay AMT, but you miss paying AMT by only $10. When you do the hybrid credit calculation, you will discover that your credit has been limited to $10 (you only get $10 for the credit). This can be a real surprise, since many tax payers don't realize how close they are to paying AMT. Tom Edit: I just realized that I answered a very old post. The new software is bringing up some old threads as unread.
Still useful information though so thanks for the post! I wonder if the AMT tax fix (should it become law) will have any effect on those eligible for the last of the tax credits? Will people who would've had a severely reduced credit or no credit at all come out better given the "AMT fix"?
Out of curiosity, does anyone know how much income you have to make to get hit by the AMT? I'm really worried about it this time around. I bought a house, a hybrid, and had a baby all this year, and I really want to take maximum advantage of all three.
"Especially vulnerable are people with income over $75,000 and some large deductions, but not the exotic ones that were originally targeted by the AMT's creators. Most vulnerable are taxpayers with several children, interest deductions from second mortgages, capital gains, high state and local taxes, and incentive stock options." Alternative Minimum Tax
That worries me, because I think my wife and I fit the bill. We make a good bit over the 75k mark for our household, we have the kid, the house, and now the Prius. Mind you I don't mind falling into a higher bracket than someone else, I'd just be disappointed if I couldn't get credit for the Prius (who with a household income below 75k could comfortably afford a Prius, anyway?), and I resent the idea of what is happening with the AMT. It's a sneaky way to get more middle class households paying higher taxes to make up for the Bush tax cuts.
What is the phone number of the Complex Law Division of the IRS? I've noticed in the 2008 TaxCut software indicates the the disallowed Alternative Vehicle Credit due to AMT can be carried over. But the Form 8801 only indicates that Disallowed Electric Vehicle Credit can be carried over, with very little detail in the instruction. I want to find out whether TaxCut's claim is correct or not.
Boulder bum: excuse me, but I earn $30K and bought a new 2008 Prius last year. How did I do it? Drove the old Corolla for 14 years and put the equivalent of car payments in the bank (and CDs) every month. It's easy to buy a Prius when you save cash and simply write a check. By the way, I have no mortgage (own a nice $150K house), no credit card debt, and no student loans. Live below your means!
