06 Model Ordered Today

I would think that a two-week wait might be worth it if you pay income tax. You'll be getting something like a 10% discount from the feds with their $3K tax credit -- but only if you take delivery sometime after 1/1/06.

 

Wait to pick up your car until 1/1/06 or after. You'll want the tax credit. Even if you owe 0 taxes to the government for 2006 (because of low income, large deductions, etc.) a tax credit of $3000 (or whatever it will be determined to be in 2006, not finalized yet) gets you a check from the government for $3000.

The tax deduction for 2005 purchases is $2000. If you expect to be getting ALL of your 2005 withholdoing back (in other words, you have a low enough income, or enough deductions, etc., so that you owe NO tax), the $2k deduction is worthless.

What is probably the case is that you are paying some tax, but have overwithheld, so you will get a partial refund for 2005 when you file for it next year. So, you probably could make use of the 2k deduction; however, a deduction only reduces your taxable income dollar for dollar and, depending on what tax bracket you're in, the actual cash benefit to you of taking a 2k deduction is going to be only a few hundred dollars.

In other words, a tax credit reduces your tax bill dollar for dollar (and even goes beyond zero to get you cash if you owed no taxes anyway); a deduction only reduces your tax bill by your effective tax rate. HUGE difference.

There are some exceptions/complications related to the above that could cause the answer to change (like the AMT, or timing issues, etc.) but it's unlikely they apply to you. If you lack confidence to figure it out, consult a tax pro.

rpm

 

There's coverage of various aspects of government incentives for 2005 and 2006 in the new Toyota Prius FAQ.

The 2006-Model-Year-Prius-Calculator also provides some side-by-side comparison of pricing, factoring in tax benefits.

 

No. You will not get a check from the government for either the 2005 deduction or the 2006 credit.
It will be processed with your 2005 or 2006 tax return.
However, read this thread for a strategy to realize the tax credit sooner.
2006 Tax Credit Strategy, How to get your $ faster

 

Basically, with the new tax credit you can sort of look at it this way. The government is subsidizing the cost of the extra expense of the hybrid component or giving you a mail in rebate in April 2007 LOL