Hybrid tax credit -- NOT ?

[Rich_in_Tampa]

Bought a Prius last January (06), and looked forward to a tax credit on this year's return.

Just heard from my accountant that I don't qualify cause I earn too much. Nothing I have ever seen about this tax credit (up to $3400) mentioned income qualifications for the credit.

Can anyone verify my accountant's advice? I can't find anything so far in my www search.

[LOL!]

Search at irs.gov

I don't see any income limits either, though the credit is reduced because Toyota has sold alot of them. Since it is a credit, it should not be affected by AMT, or should it?


http://www.irs.gov/newsroom/article/...157632,00.html

http://www.irs.gov/pub/irs-pdf/f8910.pdf

[eridanus]

Form 8910 doesn't have an income limit.

From the form, it appears that the AMT can negate or limit any benefit of the credit.


"If you cannot use part of the personal portion of the credit because of the tax
liability limit, the unused credit is lost. The unused personal portion of the credit
cannot be carried back or forward to other tax years."

[samclem]

Is this a good time to bring up the beauty of the simple National Retail Sales Tax?
Never mind.

[Martha]

If you pay AMT (alternative minimum tax), this can eliminate your credit.

For the maximum credit, tax your regular tax liability, subtract any other credits you are entitled to, subtract your tentative AMT liabity, and if you have a positive number you can use up to that amount of the hybrid vehicle credit. You would have to work through your 1040 and form 8910 to do the calculation. Basically, the credit can't reduce your AMT.

I really really don't like the AMT rules.

[Rich_in_Tampa]

Originally Posted by Martha

If you pay AMT (alternative minimum tax), this can eliminate your credit.

Might be, though the CPA didn't mention the AMT specifically. We really didn't have unusual deductions or credits this year, but I guess it catches up to you.

[Martha]

Itemized deductions do get reduced for high income taxpayers. Starting in 2006, the deduction phase-out will be reduced by one third. In 2008, it will be reduced by two thirds, and in 2010, the phase-out will disappear entirely. But these rules don't apply to tax credits, like the hybrid car credit.

There are other credits, like the adoption credit, that are phased out based on income. I haven't seen an income phaseout rule for the hybrid vehicle credit. Only see that it is not a credit against AMT. It could be that you have been paying AMT for some time and your accountant pretty much knows you will be paying it again. That has been true for us.