Taking delivery in 2005, you should get the $2,000 tax deduction. The tax credit is only available for delivery in 2006. The IRS will probably not have instructions on the 2006 credit until after your 2005 taxes are due (unless you file an extension).

Oops... you cannot take the Tax Credit. However, you can take a $2000 tax DEDUCTION. So, if tou are in the 35% tax bracket its worth about $700 instead of the ~$3150 the credit would have been worth.

It doesn't surprise me that your salesman "forgot" to tell you about this. Frankly, I'd be more than a little unhappy :angry: since its a fair amount out of your pocket and it would have cost him nothing except delay his commission by 30 days.

To be in the 35% tax bracket, I believe you have to make close to 300K/year. Chances are you're in the 25-28% bracked and you'll get a $500 to $600 decrease in taxes.

Not true. You just have to not have a lot of deductions like mortgage interest, etc. I never made 300k and there were some years (before I bought a house) when I thought I was the only one paying to keep the government open. Of course that was a number of years ago and now I imagine not many of the very rich hit the 35% bracket. Of coure the AMT is another story and I understand it may keep you from taking the full Tax Credit.

I get $200 back, certainly not a deal breaker when I bought the car.
Al 2005 Silver Prius, 15700 miles, 47.0 MPG

I am unclear on this tax credit. Is the credit only valid for the purchase year? Is it an annual credit?

Right, it is only for the Tax Year you registered/biught the car, as long as the Tax Year for the Prius is 2006.

There are many threads dealing with it, to rehash it too much here.

Here is just one...

http://priuschat.com/index.php?showtopic=14206&hl=tax

It does not repeat and applies to the year the car is "placed in service".

You can claim the 2005 Hybrid credit, but it is only a deduction of your gross income of $2000.