Confusion on Tax Credit

PersonA and PersonB are the registered owners of Prius. PersonA has to pay AMT, but PersonB doesn't. Can the full Prius tax credit be claimed by PersonB?

 

This may have been explained earlier, but here is the straight skinny up through Tax-year 2004.

The $2000 allowed for buying a "Clean-Fuel Vehicle", including the Prius is a "Tax Deduction", not a "Tax Credit".

The IRS allows you to DEDUCT $2000 from your Gross Income, which reduces the amount of income that is ultimately taxed. For example, if you are in the 15% tax bracket, then you will have your Adjusted Gross Income reduced by $2000, and the resulting taxes reduced by $300, or 15% of $2000. You would have entered this deduction on Line 35 of the 2004 Form 1040.

The IRS only allows this deduction once for a given vehicle VIN, and only for the calendar year entered on the vehicle dealer Bill Of Sale. Furthermore, there are more rules...

1) The deduction applies only to NEW vehicles that have never been titled.
2) You MUST be the purchaser of record and listed on the Title.
3) You MUST keep the vehicle for more than two (2) years.
4) If you sell the vehicle within two years, you MUST file an amended return and pay back the taxes that were allowed by the deduction. (The IRS has a bad habit of cross-referencing title transfers with VINs and tax filers.)

I don't know anything about AMT or methods of averaging losses, gains, and taxes....sorry.

 

Do you mean joint ownership of a Prius but filing separate income taxes?

 

Yes, my father (low income, no AMT) and I (high income, AMT), for example.

 

Wow.. how did this get so confusing?......
Irregardless of what you withheld on your W-2 during the year... it makes no difference "what you owe" uncle sam!.. He doesn't care!.. all he wants is his money... if you have not already paid it in.. then you will at at tax time.
What most people don't realize is they think what they owe is what they have to pay at tax time?...No thats not it.... what about all you paid in all year long?..... By the same token, if you get a refund for 1000.00.. you didn't get a dime out of uncle sam... you only got back 1000.00 of your own money that you "overpaid" during the year.

It may make a difference whether "at tax time" if you pay more or get a refund, but the true value you owe is never changed just because of the amount you withheld during the year.
Assuming your AMT is 0, your tax credit should basically be 3100.00 "credit" to you when the dust settles.

If you are someone who normally would pay say.... 1000.00 when the dust settles.. the tax credit would bring a 2100.00 refund instead!..
If you are someone who gets back 1000.00 at tax time.. the credit would bring an extra 3100.00 to you for a final tally of 4100.00 back!

Thats the way I see it.. I could be wrong.... but a credit is a credit?
How else can it be an incentive to buy a hybrid?... It should not be rewarded to some and not others?
The only exception to that is that is that the AMT rules!... based on whatever credit, you cannot get away with paying less than the AMT.

Are we are making this too hard?

 

Most people will qualify for the full credit as the AMT primarily affects the fairly well off.

It''s not hard to determine whether AMT applies and to what extent.
If your situation hasn't changed significantly since last year, one easy method is to look at your last years tax forms.

The AMT has been known about and discussed on PC for months.

 

I'm sure you are right that many people will be affected by the AMT.

Most people will not be affected because most people are not well to do (by definition) and the AMT affects those who are well off.

 

I"m not a rocket scientist when it comes to taxes, but how do you not have a tax liability of at least 3100.00 and still have enough to affort buying a prius?

Humm.... again.. your tax liability is not what you pay at the "end" of the year... its what you pay all year long "plus" the amount you pay at the end of the year "if any".

I forget what all the tax brackets are, but I believe the lowest bracket is around 15%?
Very simplified calculation: That means if you made only 25000.00 for the whole year gross, them X 15%, you would only be liable to uncle sam for 3750.00 in taxes?.... minus whatever other credits etc you may have.... at any rate they would take 3100.00 of that figure and you would only be liable for 650.00. So if on your W-2 you have been taking anything at all out every month, you would get all of that back except the 650.00.

Just remember your not paying them at the end of the year...your paying them everytime you get your paycheck!... don't forget to add in that! because the 3100.00 comes off of that liability I would think?

Its totally our decision how much we pay every month within the limits of our choices (ie: 0 deductions verses 1 or 2 etc.) We can lie on our W-2's and deduct whatever we want to try and make it so we don't have to pay even more at the end of the year!.. they really don't care what you say!... because they will get the same amount from us anyway when the dust settles. The only thing we can't lie on is when we actually file our return... thats where it really counts!

And as far as missing out on the 05, I think the higher quality 32000 color screen will be really nice!! Especially if you want to play DVD's! among the other little goodies!

 

Presumably you are getting a healthy mortgage interest deduction, deductions for your children, charitable deductions, etc.
Just because these programs don't write checks doesn't make them philosophically different from unemployment and welfare.
The government just skips the steps of collecting the money then sending out a check.

Because of these programs, you're apparently going to pay no income tax for 2006.
Congratulations. I am sincerely happy for you.
Are you unhappy because the government isn't going to send you a check on top of that?

 

You'll get no argument from me on that.
I'm all for tax reform.

How's this for a radical idea?
Get rid of all tax deductions and credits.
If the government wants to support some activity financially, let them pass a SPENDING law instead of hiding spending by failing to collect the money in taxes.

 

A consumption tax is very regressive.
Income tax is a much fairer system. imo

P.S. I've got a radical idea about campaign reform too!

 

Wow! Prius is a very significant chunk of your annual income. I consider Prius to be an expensive car, and my income is much higher than yours. My first car was about $14.5K, and my second (current) car was about $15.5K. Now I'm looking at something almost twice as those. Too bad I like high tech gadgets.

 

The 2005 incentive is a deduction against income - so if you pay 25% tax rate and the deduction is $2000 you get $500 cash benefit. In 2006 the incentive is a credit and not a deduction. A credit of $3150 is worth that amount in cash against your tax laibility or as a refund if you do not have a liability. That is the way I understand it.

 

Nope.
This credit will not reduce your tax liability below your AMT.
Your minimum AMT is $0.
So this credit will not reduce your tax liability below $0.
(No refund if you don't owe taxes.)
Also, you cannot carry over the credit to the following year.