2006 Tax Credit - NOT!

Discussion in 'Prius Tax Credit Discussion' started by bsd43, Feb 4, 2007.

  1. fshagan

    fshagan Senior Member

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    <div class='quotetop'>QUOTE(stanlwyjohn @ Feb 18 2007, 05:48 AM) [snapback]392309[/snapback]</div>
    If you triggered the AMT, you are indeed rich. You just don't know it. ;)
     
  2. Stev0

    Stev0 Honorary Hong Kong Cavalier

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    Huh. I pay AMT, but didn't get any credit because of so much capital losses. I don't care, though, because I'm getting a nice refund (nothing worth bragging about, which is good because I'd rather have my money making dividends than sitting in Uncle Sam's pocket not doing anything).
     
  3. seasidetraveler

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    I was very upset also, because the only reason I upgraded from my 2005 was my dealer called and said "It's the last month for the $3100 tax credit, it's like the govt writing you a check for $3100!" I didn't know that it is limited to only the amount that you would be owing on CA tax! So I only got $720 credit- WHAT A FREAKIN JOKE! I do like the 2006 with the couple nice features, but not worth the extra money I lost putting a downpayment.
     
  4. John in LB

    John in LB Life is good

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    We were hit with the AMT also - resulting in only $256 out of $3150 being credited.

    However, one thing I would like to mention here is that if you can claim the car for business expense (whether for your own business, or as an employee using the car for the purposes of your employer), then that portion of the credit has the opportunity to circumvent this limitation to a large degree.

    Specifically, the portion that is claimed for business expense can be claimed against your 2005 tax return and can be carried forward for up to the next 20 years. Now, each year it is limited by the AMT calculation - but you get 21 years to get the business portion back.

    As an example, lets say you use your car 60% of the time for business, then on form 8910, line 6 would have 60% resulting in $1890 belonging to business and the other $1260 belonging for personal.

    The $1260 personal would be tested against the AMT in 2006, and whatever portion you are not allowed to claim is lost forever. So, if you got $200 back, the remaining $1060 is just lost.

    However, for the $1890 business portion, that part of it goes into form 3800. There, it is also tested against the AMT and for the 2006 tax year you won't get anything for it (because you already tapped out the AMT limit to get your personal $200). HOWEVER, you are entitled to carry over the $1890 portion back to your 2005 tax return and get as much of it back as you can up to the 2005 AMT limit - and that's money you would get right now. If you hit the AMT limit in 2005, you can carry over whatever is left over for the next 20 years (2007, 2008, etc... tax returns). Each year testing against the AMT limit to try to get your whole $1890 back.

    To make this all work, it has to be a business expense AND you have to file form 3800 (make sure your accountant does that, even if it does not result in an immediate refund, because this is the form that lets you carry forward the credit to next year).
     
  5. Begreen

    Begreen Member

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    We got burned badly by the AMT tax as well. Who's brilliant idea was it to tie the hybrid credit to AMT? If I had bought a Suburban or Hummer, it might have been fully deductible, but try to help out with energy independence and the govt. taketh away. This is an incentive right? Currently too POed to say more.
     
  6. mootsman

    mootsman New Member

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    Just got our taxes done and got the full $3150 as I expected. Without it our tax refund would have been $23.
     
  7. prius530

    prius530 Junior Member

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    <div class='quotetop'>QUOTE(bsd43 @ Feb 5 2007, 12:24 AM) [snapback]385642[/snapback]</div>
    how is the hybrid tax credit any different from other tax credits in that any unused credit can be carried over into future years? not necessarily doubting u, i just havent seen any good explanation of why the unused remainder cant be carried over. thx.
     
  8. JimN

    JimN Let the games begin!

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    <div class='quotetop'>QUOTE(prius530 @ Apr 2 2007, 02:47 AM) [snapback]416332[/snapback]</div>
    The only explanation is: because that is the way it is written. Do you have any idea how many lawyers and accountants would be put out of work if the tax code was based on logic and simplicity?
     
  9. asills

    asills Junior Member

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    My wife and I file jointly, no kids (no house, few investments) and we're a but sub-100K together and we got the full refund. I actually had no idea how to get the AMT to trigger!
     
  10. loopyloops

    loopyloops New Member

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    Hi folks. Haven't been here for a while but loving my Prius!!! I haven't read all the comments but I think Toyota should make up for the Tax credit in some way. When I was shopping for my Prius (luckily I got it at sticker), I was told by each and every sales person (including the one I purchased the car from) I'd be getting $3450 back in a tax credit. Not one sales person said - not one said "might", they all said "would". Little did I know that AMT would mean I'd get nada!!! Not happy about this!!!
     
  11. qbee42

    qbee42 My other car is a boat

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    <div class='quotetop'>QUOTE(loopyloops @ Apr 14 2007, 02:22 PM) [snapback]423289[/snapback]</div>
    When have you ever been able to believe anything car sales people say? Seriously, if they aren't lying outright, then they are badly misinformed. I never trust anything stated by a sales person until I've researched it myself.

    Tom
     
  12. fshagan

    fshagan Senior Member

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    <div class='quotetop'>QUOTE(seasidetraveler @ Mar 24 2007, 08:54 AM) [snapback]411513[/snapback]</div>
    Not sure that makes sense ... there is no link between the federal tax credit on the Prius and California taxes.

    The credit can only give you back up to your total tax liability, so those that owe less than $3,150 don't get the full credit. But they wipe out their entire tax liability for the year, so they pay NO INCOME TAX. A 100% reduction in their taxes! Meanwhile, my tax liability was $13,253 before calculating the credit. So I still paid $10,000 more than those that had their entire tax liability wiped out.

    And the AMT? If you pay the AMT, you are rich. The tax law requires you to pay a certain minimum tax ... the AMT or "Alternative Minimum Tax" ... and the credit can't take you below that "Minimum Tax". I didn't trigger the AMT with an adjusted gross income of $109k. Those of you who did trigger it are simply not paying your share! ;)
     
  13. loopyloops

    loopyloops New Member

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    <div class='quotetop'>QUOTE(qbee42 @ Apr 14 2007, 05:27 PM) [snapback]423372[/snapback]</div>
    You're right - I should have done my research!
     
  14. PA

    PA Member

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    I ended up losing a little of the tax credit because of my tentative AMT, even though I eventually didn't owe any AMT. This was due to some other tax credits I was eligible for. Oh, well.

    I'm still driving a much nicer car than I had before ... :)
     
  15. qbee42

    qbee42 My other car is a boat

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    I want to add a couple of comments about AMT. I didn't trigger AMT, and I got the full $3150 tax credit, so this isn't a personal issue. For the previous posters making statements about being rich if you trigger AMT, this is true in the broad sense of being rich. Pretty much all of us on this forum are rich, considering we were able to buy nice cars. But moving away from the broad definition of rich, and focusing on AMT, rich isn't what it used to be. AMT was designed to close loopholes used by very wealthy taxpayers, but it wasn't tied to cost of living. With time, the cost of living has risen, and along with it (to some extent) income. This means that more and more taxpayers are getting caught by AMT, even though they are effectively no wealthier. Everyone knows this is wrong, even our illustrious leaders, but our country has become accustomed to the added revenue from AMT. If we change it or make it go away, we have to find another source of tax revenue. So, for you AMT payers, yes, you're rich, but making you pay AMT probably isn't fair.

    Tom
     
  16. fshagan

    fshagan Senior Member

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    <div class='quotetop'>QUOTE(qbee42 @ Apr 15 2007, 07:33 AM) [snapback]423609[/snapback]</div>
    AMT is also triggered when you have deductions that bring your taxable income below a certain level. I'm not sure why its "fair" that someone buying a home with an expensive mortgage will pay less Federal Income Tax than someone who rents or qualifies for a lower interest loan, or why married people will pay less at some income brackets (and more at others) than gay couples or single people. AMT is just one symptom of a broken tax system, and since the "rich" pay most of the Income Tax in this country, when you hear people complaining about taxes, you can assume they are "rich" by those standards (or, at least, in the top 1/3 of the wage earners). The poor do not pay any income tax, and in fact get money back they never paid in (if they qualify by virtue of also having children when they can't afford them).

    What is lost in the tax discussions is the "payroll tax", which hits even the poorest wage earner from the first dollar they earn. So while its true that no income tax is paid by the poor, they are hit with a tax that is about 15% (when you add in what the employer pays that could go to increased wages). Ironically, when you hit just north of $100,000 in wages, you no longer pay this tax. So it truly is a situation where the poor pay a tax that the rich get away with not paying as much into (as a percentage of income).

    Flat tax proposals attempt to address this inequity by combining all Federal taxes on income into one tax and applying them evenly across the population, sometimes graduated so the poor would pay no more than they are now, but generating higher income taxes for many taxpayers (especially those with a mortgage deduction, married couples, etc.) The "fair tax" proposal abandons taxes on income ... which ignores those that have accumulated wealth and no longer have to work (the truly wealthy) ... and taxes consumption with a national sales tax on everything. The poor would pay less overall tax, including a full refund at the end of the year for the lowest 5th of wage earners, but this is routinely defeated because those that earn more would certainly pay more as they buy more things.

    Most of us don't really want fair taxes ... we want to skate by and let the other guy pay our share.
     
  17. loopyloops

    loopyloops New Member

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    <div class='quotetop'>QUOTE(qbee42 @ Apr 15 2007, 10:33 AM) [snapback]423609[/snapback]</div>
    Yes, rich is relative. Last night, just for giggles, I looked to see what's considered lower, middle and upper class. Well, the category I fell into made me laugh (and cry). If I sold my house in Sherman Oaks (and for those of you familiar with the area - I'm north of the blvd. south is where you want to be), and moved to Austin (we bought in 2000 - so the value has almost tripled - and I love Austin, btw), and I made the same salary, I might feel rich. But, with two kids, a mortgage, etc., we almost make ends meet - and we're not the kind off folks who live above our means - heck, our mortgage is what most consider rent money as we were careful (and fortunate - though it was sad - to have a death in the family that enable us to put 30% down). Anyway, the fact that we're subject to this AMT garbage makes no sense.
     
  18. haceaton

    haceaton New Member

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    I think there is a lot of confusion on this board regarding the AMT. Many people who are not subject to the AMT will have their Prius tax credit reduced by an amount that is derived with the use of the AMT form 6251. For incomes as low as $62,550 for a married couple this could start to affect you. That is "rich" by world standards and even relatively well off for much of America, but I don't think many people consider that to be truely rich.

    That aside I have found a nasty glitch (that affects me) with the Prius tax credit that potentially harms (or helps!) anyone who had their credit reduced by the AMT form. I ended up overpaying my State income tax this year by a little over $1,000. I am not subject to AMT, but the my credit was reduced by the formula used on the AMT form 6251. Because the state income taxes are irrelevant to the answer on line 33 of form 6251, it doesn't make any difference to my final tax bill whether I over or under paid my state tax. If I had paid the correct amount of state tax, my Prius credit would have gone up by the same amount that my before-credits tax amount went up, resulting in the same final tax amount for this year.

    However, next year I will have to report that tax refund as taxable income. If I actually were subject to the AMT, it would get removed again in the AMT form, so it would not be an issue. However since I am not subject to the AMT, there is no mechanism to exclude it from my taxable income and next year I will pay tax on the refund.

    Similarly if someone in my situation had underpaid their state taxes and had to write a check at year end, they would gain because some of that state tax would be shifted to next year where it would not reduce the Prius tax credit, but will reduce their income (assuming that they itemize).

    Bottom line, over paying or under paying the state tax this year has zero effect on my final federal taxes this year, but that fact that I overpaid will raise my taxes due next year. If I had underpaid it would have lowered my taxes next year.

    It's completely unfair, but that is the situation. :angry:
     
  19. Jonathan

    Jonathan New Member

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    Well, just to vent... I traded my 04 for an 06 also 'hoping' for $3150 back. But alas, my total tax was only $455 (thanks Time Warner stock-loss). On top of that, I can't figure out the [email protected]#$ing forms to amend my return (filed online without entering Prius info) so I am giving that 455 to govt. Cant' tell you how frustrated/pissed I am right now about the whole thing (mostly my inability to understand the forms) I'm a commercially rated, instrument pilot, retired (recovering) Air traffic Controller yet I go cross-eyed looking at these forms. Sorry for the rant. Good luck all! :angry: :angry: :angry:
     
  20. haceaton

    haceaton New Member

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    <div class='quotetop'>QUOTE(fshagan @ Apr 14 2007, 11:55 PM) [snapback]423484[/snapback]</div>
    With an AGI of 109k, you did not trigger the AMT, but you certainly still needed to file form 6251 (a value from line 33 of this form goes on the Form 8910 line 16 for figuring your prius credit). When you fill out form 6251 you will be adding back at least all of the deductions you had from state income taxes, state sales taxes, property taxes, and all of your exemptions too. The result makes you pay taxes on more of your AGI than "regular" taxes would and the Prius tax credit is reduced such that you effectvely pay the "tenative minimum tax". With an AGI of $109k, your Prius credit will likely be reduced even if you use the standard deduction. If you took the full $3150 credit with an AGI of $109k it is extremely likely that you made a mistake on your taxes. Don't worry, the IRS will be explaining your error to you! :eek:

    The original poster was complaining because California has a high state income tax which is normally deducted from taxable income, but the hybrid vehicle tax credit is reduced by an amount that is effectively equivalent to elliminating the state tax deduction (and then some). The original poster was likely not affected by the AMT, it is just the AMT form that is used to compute how much your tax credit is reduced.
     
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