tax credit question

rigormortis · May 16, 2007

if someone on low income purchases a prius and files for the 2007 tax credit..

say you owe the irs 1100.00 for the year and you had 1200.00 withheld, the irs refunds you $100

what happens with the tax credit ?? do you get your 1100.00 back? (or whatever the hybrid
tax break was @ time of purchase)

or does the hybrid refund only cover if you owe taxes

JimN · May 16, 2007

rigormortis @ May 16 2007 said: ↑

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if someone on low income purchases a prius and files for the 2007 tax credit..

say you owe the irs 1100.00 for the year and you had 1200.00 withheld, the irs refunds you $100

what happens with the tax credit ?? do you get your 1100.00 back? (or whatever the hybrid
tax break was] time of purchase)

or does the hybrid refund only cover if you owe taxes
[/b]
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Your question is too general to properly answer as not all income, deductions, and credits are treated equally.

Your tax liability of $1100 is what needs to be paid. It doesn't matter if it is paid with a credit, throughout the year via payroll deductions, or with the 1040 form at the end of the year. The best case is that your liability is $1100 before the credit less $787.50 credit for a net liability of $312.50. With $1200 paid throughout the year a refund of $887.50 would be due.

Now, here is where the devil is in the details. It makes a BIG difference in how that $1100 final liability was arrived at. There is a TMT (Tentative Minimum Tax) that must be paid. As many have discovered after the fact, the hybrid credit can be partially or entirely lost if you claim certain other credits. Child care credits are popular. Perhaps the earned income credit will also have an effect (I don't know for sure.)

As an estimate, plug your expected 2007 amounts into your 2006 tax software and see what happens. If you need free software check out www.taxact.com.
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tax credit question

rigormortis Active Member

JimN Let the games begin!

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tax credit question

rigormortis Active Member

JimN Let the games begin!