Hybrid Tax Credit Recapture Rules

Buy a fuel efficient used car at 1/4 the price of a Prius and save up for a house.

 

It would not be in your father's best interest to carry your car. If you had an accident, or committed some act of neglicence... or if you loaned your car to someone who did... as the vehicle's owner, your father's assets might be at risk.

I think it would be best to keep things clean, and under your own name.

/Jim

 

All good points so far... If these are not concerns however... a joint loan might work he should be primary and take the tax credit you could be joint on the loan and make payments under his supervision and you both will be financially impacted when it comes to credit score (by most financial institutions). Pay late and mess up his credit and he might kill you (a liability not yet discussed here) good luck.

 

I have a similar situation that I would like advise on.

Can I take both a 2005 tax deduction, and a 2006 credit on two Prius purchases?

I bought a 2006 Prius in 2005, and then gifted it to my daughter in early 2006. I liked her car so much, that I ordered one for myself which should be available for pickup next week. I know that I can claim the 2006 Tax credit on my own vehicle.

Originally, I was assuming that I could not take the tax deduction on the car purchased in 2005 because I would only be owning her car for less than a month. Also... because my daughter has no tax liability, there was no incentive to wait for 2006 to take posession of the car.

Of course... my logic would be flawwed if I could buy the car... hold it for a couple of weeks... gift it to my daughter... and then still take the tax deduction and/or credit.

So... can I take take a 2005 tax deduction for my first 2006 Prius now... and also take a 2006 tax credit for my 2nd Prius next year?

/Jim (2006 Driftwood #8 and 2006 Silver #8)

 

get thee to

www.irs.gov

unless you are a corporation or use the car for business only, there is no 'recapture' to be concerned about. I sold my qualifying 2004 Honda Hybrid and bought a qualifying 2005 Prius. I am allowed to take the $2000 deduction in 2005 taxes (TY2004)AND the full $2000 deduction in 2006 taxes (TY2005). I could have taken an unlimited number of these deductions so far as they each occurred in a tax year for which I both purchasd and applied for new car deductions ("clean fuel"}

 

Links for 2005 tax year:

Publication 535, Business Expenses (PDF 422K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Form 1040X , Amended U.S. Individual Income Tax Return (PDF 110K)
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I believe the IRS would give you the hairy eyeball!

 

so....once a car is purchased by a person, how would IRS know that person's intend? I doubt IRS will do follow ups with that person and see if he possess the car or not and what he's doing with that car

 

I believe they apply the "reasonable person" rule:
i.e. Would a reasonable person person believe that you purchased with the intent to keep the car if you gave it to your daughter a couple of weeks later?

(You know the answer.)

 

Also keep in mind that in most states, there are fees and sales tax incurred every time you transfer ownership on a vehicle (and in many states, the sales tax is based on minimum of the actual selling price and the "book value" of the car). If you have not already done so, you may want to double check all the costs involved either way before getting hung up on the federal income tax questions. You may find that even if all the IRS questions are resolved in your favor, the bottom line does not justify the hassle.

Good luck and have fun!

Vince

 

I live in Oregon. I will have to pay a $55 re-title and registration fee, but that is it. No sales tax in Oregon.

I have a close friend who works for the IRS running one of the audit offices. I will ask him for advice. My perception when I bought the cars was that I would only be able to get the 2006 tax credit for myself... and nothing from the 2005 tax deduction for the car I bought for my daughter. However, I am not 100% positive anymore. It is not clear to me that the "reasonable person" rule would go against me either. I bought two Prii for 100% use within my household... all people have the same last name, live at the same address, and are my legal dependents. It is not like I have the intent of buying/reselling vehicles to take advantage of a tax credit.

/Jim

 

the "purchase to use" rule is designed to resellers from claiming the credit. they could buy a car, drive it 100 miles sell it as used for a new (probably more) car price PLUS the tax credit.

i think as long as you dont gift a Prius to any more relatives, you can easily get away with two. there are many two Prius families here, and as i have predicted before, the Prius, if allowed to do so and given enough time, would be the most popular car in the world. the fact that the car is in use by an immediate family member makes it that much easier to do.

 

Can you gift a $28,000 vehicle without penalty? Doesn't the person receiving said gift have to report any gifted assets valued over $5000 on their tax report as income?

Isn't that the whole problem about the death penalty for farmers who want to pass their farm/land to children without the tax burden ?

 

Ahh, so the IRS only goes after the multimillionaires who want to pass their money to their children so they will never have to work for a living. Good to know that the Republicans are repealing this tax so that the multimillionaires get to pass on money in their bloodline. Even though you're supposed to file the $11k or $22k joint gift in your return, I bet the IRS would never be the wiser if you neglect to do so.

Snowman, you keep editing your response with new info!!

 

Probably the worst that'll happen if you claim the deduction is that the IRS will deny it.
As you weren't initially planning on getting the deduction, you probably have nothing to lose.
Do consult a tax consultant first. B)