Tax Credit fluxuates based on income???

Discussion in 'Gen 2 Prius Main Forum' started by cjmebm, Jul 31, 2006.

  1. cjmebm

    cjmebm New Member

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    I just purchased a 2006 super white package #6 prius... YAY!!!

    I purchased on Saturday and today (Monday) called my salesman to ask about what I need to do to receive the 3150 tax credit (I did not know if there was a form I was supposed to receive or something).

    He told me- the credit varies based on income and to call my accountant... Needless to say I was pretty angry that 1) this was not explained prior to the purchase and 2) that Toyota (or that specific dealership) could give me no more detail about the fluxuation beyond, "call your accountant, he'll know".


    Any information people have on this would be greatly appreciated.
    Thanks
    Carly
     
  2. sl7vk

    sl7vk Member

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    <div class='quotetop'>QUOTE(CJmebm @ Jul 31 2006, 10:39 AM) [snapback]295072[/snapback]</div>
    My understanding is that you get the full discount unless you run into the Alternative Minimum Tax..... I don't risk running into that anytime soon, and you probably don't either.

    Also, if your federal tax liability is less then 3150 (i.e you aren't making much money), then there isn't 3150 to give back to you, and they'll give you back what you owe...
     
  3. wstander

    wstander New Member

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  4. richard schumacher

    richard schumacher shortbus driver

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    What they said. Remember that you're lucky if the salesanimal knows enough about the car he's trying to sell you, never mind tax law and regs.
     
  5. rufaro

    rufaro WeePoo, Gen II

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    From a friend who previously hit the amt and bought a Cambrid this year...he said once you git there, it likely won't be a problem again, for THIS purchase anyway...but who knows? We hit it last year and are now keeping our fingers crossed.

    You expect a CAR SALESWEEVIL to know/tell you honestly about ANY of this stuff if it might affect his/her bottom line????? <_<
     
  6. tacomel

    tacomel New Member

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    The tax credit does NOT fluctuate with income.

    There is only minimal truth to what your salesman said, in that your eligibility to pay the AMT somewhat correlates to income. If you makes less than $62550 per year then you will not be subject to AMT, for sure. That's the amount for 2006 you can exempt from AMT consideration. If you make more than that, it depends on your deductions - certain things can be deducted under AMT (e.g. mortgage interest and charity) and some can't (e.g. personal exemptions, state taxes, property taxes, and of course, the Prius credit).

    If you think there's a chance you'll be subject to AMT, see if a tax advisor in your area will give you a free consultation. I just gave one my 2005 return, said how I expected everything to change, added the Prius credit, etc.

    Because WI has high income tax and high property tax, of the 2x$3150 I qualify for, I won't get to use about $1500 of it due to AMT. Your situation WILL vary.

    NOTE: The $62550 assumes you're married filing jointly. Divide that by half if you're single.
     
  7. Betelgeuse

    Betelgeuse Active Member

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    <div class='quotetop'>QUOTE(Taco Mel @ Jul 31 2006, 04:17 PM) [snapback]295282[/snapback]</div>
    The AMT kicks in at $31275 if you're single?! That seems like a really small amount, considering salaries these days. And it seems like most people who are going to be buying hybrids (i.e. those with enough money to buy something more than Corolla or a Civic) would run into this AMT problem.
     
  8. tacomel

    tacomel New Member

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    Nope - that's the exclusion amount, not the amount it kicks in at.

    Basically, you figure your taxes two ways - the regular way (with Prius credit) and the AMT way. The AMT way is similar to the regular way except that you can't use certain deductions. When you're done figuring it the AMT way, then you subtract the exclusion amount from the final income you come up with.

    Now, you figure your total tax. The regular way uses the progressive scale. The AMT way is 26% and at some point (so far above my income that I don't know) goes up to 28%. Note that at this point you subtract $3150 from your regular tax, but do NOT subtract it from the AMT.

    Finally, compare the two. Technically, the AMT amount is the difference between tax figured the "AMT way" and the regular way, but practically, you end up paying the greater of the two.

    See how confusing and complex and convoluted that is? That's why you should call your accountant (and congressperson).
     
  9. sl7vk

    sl7vk Member

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    I don't think AMT is run into by very many people. I'll make 6 figures this year, and granted my wife doesn't work, I won't be running into it. I have a small mortgage though, and very little charitable donations. Those of you living in states, like CT that have high taxation rates could hit this quicker then us in podunck states though... It's all very confusing.
     
  10. Betelgeuse

    Betelgeuse Active Member

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    <div class='quotetop'>QUOTE(Taco Mel @ Jul 31 2006, 04:36 PM) [snapback]295301[/snapback]</div>
    OK. I think I understand. So it's only the amount you make over $31K that you'd (potentially) pay the AMT on. Since the "regular" tax threshold is much lower than that, chances are that, if you make $50K, the total tax (i.e. in dollars) that you have to pay is more under the "regular" rules than under the AMT rules (even though the percentage is higher for the AMT).

    This is why I use TurboTax :)
     
  11. curtissac

    curtissac New Member

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    <div class='quotetop'>QUOTE(CJmebm @ Jul 31 2006, 09:39 AM) [snapback]295072[/snapback]</div>
    Why did you call a car salesman for tax advice? :blink:

    A responsible sales person would never tell you *how* to get your tax credit. That is a job for your tax preparer or CPA. They are not supposed to give you tax advice. At the same time, when they told you that the car was eligible for a $3150 tax credit, which was accurate, but they should have immediately qualified that by saying you should consult your tax advisor.

    While I am now repeating what others have already said, I don't know of any income restrictions but if you pay AMT you may lose it.

    Another thing to consider - Did you buy or lease? If you leased, you don't own the car, you are just renting it, and the leasing company gets the tax credit instead of you.
     
  12. tacomel

    tacomel New Member

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    Bingo - you've got it, and now know more about the AMT than 99% of the general population.

    Is it worth it for you to talk to a tax advisor now? That depends. If you have "timing" items, it might be worth it. For me, after previewing my AMT situation, I will pay my property taxes in January of 2007 rather than "early" in December of 2006, since I'll get no deduction this year. On the other hand, if you don't have to make decisions about those sorts of things, and you don't intend to adjust your withholding in anticipation of the tax credit, then you can sit back and wait until next year to figure this all out. And yes, TurboTax will figure out if you owe AMT.
     
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