Do you lose your hybrid credit if you make too much?

Since he is doing his taxes for 2005, the hybrid credit was not a credit, but a deduction. From my understanding the deductions do phase out as your income increases. For those who bought in 2006, our taxes will be due april 2007 and the hybrid credit for 2006 is a credit not a deduction. A deduction just adds to our other deductions (kids, church, etc) but a credit actually decreases the tax amount we owe. This is how I understand it. I hope the tax credit does not decrease with increased incime.

 

<div class='quotetop'>QUOTE(DocToss @ Apr 16 2006, 05:24 PM) [snapback]240627[/snapback]</div>

That correct. My understanding is that the credit comes right off the top. The trick is to avoid the AMT.

 

I don't think income affects the Prius dedeuction. We were in the highest tax bracket for 2005, but we were still able to deduct the Prius, and our CPA is very conservative in his calculations. There are some deductions that decrease or disappear with higher incomes, such as student loan interest and education deductions, but he clean fuel deduction is a separate line on the 1040.

Your friend should double check on that.

If you bought in 2006 it's completely different. If you owe $5000 in taxes, then the Prius credit lops $3000 right off that.

 

<div class='quotetop'>QUOTE(DocVijay @ Apr 16 2006, 08:49 PM) [snapback]240732[/snapback]</div>

...subject to the AMT calculation.

 

<div class='quotetop'>QUOTE(IsrAmeriPrius @ Apr 16 2006, 08:52 PM) [snapback]240735[/snapback]</div>

Right - for this coming year, the credit can reduce you tax liability to zero, but not less than zero - in other words, the credit cannot get you "money back" once you've reduced your tax to zero.

That means you have to have made enough to have at least a $3000 tax liability in the first place, and as noted above, not subject to the AMT. If your adjusted gross is anything over $30k for a joint return, you may see the full $3k benefit. If not, not...

 

<div class='quotetop'>QUOTE(jrct9454 @ Apr 17 2006, 10:16 AM) [snapback]240868[/snapback]</div>

I've seen this analysis once before and it has me concerned. I calculate the amount I have withheld from my pay for taxes so that I never owe when April 15th rolls around.

Should I recalculate so that I would actually OWE $3,150 in taxes for 2006 so that I can take advantage of the credit?

I'm so confused. :blink:

 

<div class='quotetop'>QUOTE(jrct9454 @ Apr 17 2006, 10:16 AM) [snapback]240868[/snapback]</div>

Make to much to get tax credit? ..... Man am I in with the wrong group!

Could each of you send me one dollar? Just 1, thats all. :mellow:

 

<div class='quotetop'>QUOTE(Emma @ Apr 17 2006, 07:22 AM) [snapback]240874[/snapback]</div>

No; your income tax withholding has nothing to do with this subject. Federal income tax withheld from your paycheck counts as tax that you have paid; you've merely paid it in advance rather than with your return. Go ahead and adjust your withholding with your employer as makes the most sense for your situation.

Since today is tax day, maybe you have a 2005 Form 1040 out on your desk. Unless I am mistaken, it is the number on line 44 ("Tax") that must be at least $3,150 NEXT year in order for you to take the full credit. You will take that credit somewhere down in lines 54 or 55. Your income tax withholding doesn't get recognized until line 64, so no matter how big it is, your credit has already been received.

As others have mentioned, if you will show any AMT on line 45 in 2006, you've been diddled and you probably won't get the credit.

Please don't let my references to the 2005 Form 1040 confuse you. The credit will be figured on the 2006 return, and who knows, the line numbers might even be different on that form.

 

<div class='quotetop'>QUOTE(highroute @ Apr 17 2006, 11:04 AM) [snapback]240889[/snapback]</div>

Thank you for the explanation. I'm breathing a bit easier now.

 

<div class='quotetop'>QUOTE(burritos @ Apr 16 2006, 05:11 PM) [snapback]240618[/snapback]</div>

Look in the topic 2006 AMT Rules for a post I and others have made on this topic in greater detail.

George