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Tax credits / incentives for hybrids?

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Comments

  • kdlukdlu Posts: 4
    What are the requirements to get the tax credit? I'm not sure what it means to take delivery in 2006. Can I purchase a vechile now and have them hold the vechile till Jan 1, 2006 and still get the credit? Or must I wait and not "purchase" till 2006. Is the credit for 2006 vechile or must you purchase in 2006 calendar year? Also, is anyone getting better than MSRP pricing? That seems to be all I've heard. I'm debating on whether to purchase now to take advantage of the Clean Air Vechile Sticker in CA, but they're only issuing 75,000 and have already issued 45,000. Or risk DMV reaching the quote by Jan 2006.
  • kdhspyderkdhspyder Posts: 7,160
    We asked our regional Toyota office. It is their opinion that the count will be based on state DMV registrations, not sales numbers reported by the auto makers. So if your state registers your vehicle on the day you buy it, you will have to wait until Jan 1, 2006. If there is any delay in the reporting to DMV you might get yours in late Dec while the paperwork is logged in at the state level in Jan '06. It's a risk because the issue is a lot more complicated than Congress foresaw. The IRS has not published any clear guidelines as yet and they dont have to until next year sometime.

    - Can you buy 10 Prius'? Get 10 credits?
    - If you and your wife each get one do you have to file separate returns in 2007?
    - Alternative Minimum Tax? Will it cancel your credit?
    - Is it DMV registrations ( likely ) or figures reported by the automakers ( not likely ).

    I'd at least get your order in and get on a list for delivery in early Jan if possible. If you wait to place your order in Jan it might be Mar when you get it.
  • I just took delivery of a 2006 new Civic Hybrid Jan. 23rd,2006. If anyone knows where to get the Forms or whatever I need to get ready in advance before it ends. I realize I won't be able to get the Credit until 2007 when I file my 2006 return - but I would like to know who to contact etc. How much is the credit -if anyone knows?
    Thank you for your help.
  • jrct9454jrct9454 Posts: 2,363
    If you're referring to the Federal credit, there are no "forms" - when you do your 2006 taxes in 2007, there will be a line on the 1040 to take the credit. By then of course, the IRS will have issued official guidance on the amount for each car. Current estimate on the Civic Hybrid is in the neighborhood of $2000 or so. In any case, there is nothing for you "to do" in the meantime, except hang on to your sales documentation, and enjoy the car...
  • mirthmirth Posts: 1,212
    ...how the heck they are going to manage the "limit" of 60K cars per manufacturer. I mean, everyone who buys a Prius is going to put in for that credit, and sales were 100K+ this year. Is it going to be a case of early filer gets the credit?
  • jrct9454jrct9454 Posts: 2,363
    Well, I can guess, but that's all it would be - in the case of Toyota, the IRS could say that you have to have purchased before, say, July 20 2006 to claim the credit - and then either require a copy of the documentation with your return, or assume that only an audit would turn up problems. I agree that this is another case of Congress trying to legislate behavior using the tax system, without giving the IRS' role in the law much thought....but you know who will absorb all the blame if your angry taxpayer wants to find out why they didn't get the credit....

    Only Toyota is going to be bumping up against the ceiling in calenday year 2006 - none of the others, including Honda, has enough hybrid volume to approach the cutoff until well into next year, or even beyond.
  • kdhspyderkdhspyder Posts: 7,160
    There is some guidance on this already. Essentially that's why there is a full 3 mo's grace period after the quarter when the limit is reached. To be verified,

    Toyota'/Lexus reach it on 5-13-06. Everyone buying in 3rd Qtr still gets the full credit. But you must take delivery by 9-30-06.

    Honda reaches it on 10-02-06. Everyone taking delivery until 3-31-07 get the credit.

    The full credit may go to as many as 100000 buyers !!! OTOH due to the AMT some higher-income buyers will not be able to apply the credit..

    Definitely see your tax advisor!!!!!
  • from the IRS.gov web site

    IR-2006-57, April 7, 2006

    Some Toyota and Lexus Vehicles Certified for the New Energy Tax Credit

    Washington — The Internal Revenue Service has acknowledged the certification by Toyota Motor Sales U.S.A., Inc. that several of its 2006 vehicles and a 2005 model year vehicle qualify for the hybrid tax credit enacted by the Energy Policy Act of 2005. The tax credit for hybrid vehicles applies to vehicles purchased on or after January 1, 2006, and may be as much as $3,400 for those who purchase the most fuel-efficient vehicles.

    The hybrid vehicle certifications recently acknowledged by the Service and their credit amounts are:

    2005 Toyota Prius $3150
    2006 Toyota Prius $3150
    2006 Toyota Highlander 4WD Hybrid $2600
    2006 Toyota Highlander 2WD Hybrid $2600
    2006 Lexus RX400h 2WD $2200
    2006 Lexus RX400h 4WD $2200

    Starting in 2006, this tax credit replaces the tax deduction of $2,000 which was previously allowed for taxpayers who purchased a new hybrid vehicle before December 31, 2005 for the clean-burning fuel deduction. The tax credit requires a different certification. Many currently available hybrid vehicles may qualify for this new tax credit.

    Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
  • stevedebistevedebi LAPosts: 4,098
    "...how the heck they are going to manage the "limit" of 60K cars per manufacturer. I mean, everyone who buys a Prius is going to put in for that credit, and sales were 100K+ this year. Is it going to be a case of early filer gets the credit?"

    It is based on when you bought the hybrid. Your contract paperwork has the date of delivery. If it is before 20 Sep 06, you get the credit.
  • lvbaumlvbaum Posts: 2
    I understand that Toyota has been selling almost 15,000 Prius' a month in 2006. That means that Toy will hit 60,000 units in the first week or so of May. The credit is good for purchases that occur up to the end of the calendar quarter after the calendar quarter that they reach 60,000 sales. That means that if they reach 60,000 sales in May, the end of that calendar quarter is June 30 and the end of the subsequent calendar quarter is Sept. 30. So, you have plenty of time. Congress is working on passing a bill that will eliminate the 60,000 unit limit so it may be a moot point.
  • rotarota Posts: 2
    I have a 4Runner for tax deduction. This year I'm looking to purchase another vehicle for tax purpose. I do like to get a hybrid or one that has better milage. Does anyone know of any hybrid SUV with a gross weight over 6000lb to qualify for the tax deduction?
  • lvbaumlvbaum Posts: 2
    Rota - You do know that the 6000 lbs. SUV deduction loophole has been closed. See the IRS web site. The first year deduction is limited to $25,000 unles it is a truck, a closed cargo van or seats 9 behind the driver. Other rules apply. Be careful on these Section 179 deductions. I have heard a lot of people ignorant on the subject making false statements about the deduction - like you can take it every year if you trade-in your Range Rover, or you can deduct 100% of the vehicle and then deduct milage in future years. All this section ever was, was just an accelerated depreciation method. So if you take the $25,000 first year deduction, you can only take very small deductions for the next four years until the vehicle is fully depreciated. Check with a CPA that works with a lot of small businesses fr good advice.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    Check with a CPA that works with a lot of small businesses fr good advice.

    That is the best advice. Turbo Tax leaves a lot of information out. You can have a real surprise if audited.
  • jrct9454jrct9454 Posts: 2,363
    Prius sales in 2006 have been averaging about 8500 a month; current projectiions are for Toyota to have full credits through the 3rd quarter, with phaseout starting in the 4th quarter of 2006.

    Keep in mind that it is the total for the manufacturer that counts against the 60k ceiling; while the Prius is Toyota's best seller, it also sells hybrid versions of the Camry, Highlander, Lexus RX, and Lexus GS, all of which count toward the limit. Anyway, Toyota will hit the ceiling late in Q2, or early in Q3; the next quarter after that still gets full credits, then the phaseout begins in the following quarter.
  • kdhspyderkdhspyder Posts: 7,160
    42175 hybrids 'sold' through 3-31-06. 60,000 limit is expected in May
  • nymaxxnymaxx Posts: 30
    Am profoundly disappointed with my 2005 Honda Accord Hybrid and am thinking of trading in on a new Prius. I DID claim the $2000 deduction in 2005.

    Is there a requirement that I hold on to the Accord for a certain amount of time to be eligible for the deduction? Also, will it affect my eligibility for the Prius $3100 tax credit?

    Thanks!

    Joe
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    I would say you have to keep the car 3 years.

    Other requirements may also apply. If any of these conditions change within 3 years of purchase, you may have to return some of the money saved by the deduction.

    http://www.fueleconomy.gov/feg/tax_hybrid_old.shtml
  • jrct9454jrct9454 Posts: 2,363
    Yeah, I too have heard that the IRS requires a 3 year holding period. On the other hand, even if you have to let them "recapture" some large part of the '05 tax year deduction, your '06 tax CREDIT on the Prius is over $3000, if you do it before the end of September, and if your particular tax situation allows you to take the full hybrid credit on your '06 return. [The credit has to be applied to your tax liability AFTER all other credits, and cannot bring your tax below zero - so you need a total tax of at least $3000 this year for the credit to be meaningful.]
  • wvgasguywvgasguy Posts: 1,405
    Interested in Tax Credits? check with your state as well. WV's ends in June, but if my Camry Hybrid comes in when I expect I'll get the Fed credit of $2600 AND a three year credit in state taxes of a total up to $3750. Not to mention saving $3500 in gasoline over the next 100,000 miles. Makes a Hybrid a pretty good option
  • Most of my income is from Social Security and not taxable.
    I usually get all my withholding back and "UNCLE" isn't
    paying credits to us "no-taxpayers". :cry:
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    As you have discovered the hybrids are mainly for the upper middle class car buyers. Toyota does not build a hybrid for the entry level buyer. They are quite proud of the fact that their cheapest hybrid the Prius has a demographic buyer with an annual income of $85,000. Unless you put a lot of miles on a car each year it is hard to justify a hybrid anyway. I also think a lot of these fat cat hybrid buyers are going to get hit with AMT this year and they also DO NOT qualify for the tax credit.
  • stevedebistevedebi LAPosts: 4,098
    "I also think a lot of these fat cat hybrid buyers are going to get hit with AMT this year and they also DO NOT qualify for the tax credit."

    Congress put AMT relief into this year's budget. I don't know if the budget has passed yet. I believe it is a COLA adjustment.
  • kdhspyderkdhspyder Posts: 7,160
    Up to date steve.. I think the President just signed it last week. Good point
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    I believe it is a COLA adjustment.

    That would be good, as it was put in place during the Carter administration. Wages have gone up since then. At least mine have. I think you can average back also. So I may get some back in retirement.
  • Keep in mind that it is the total for the manufacturer that counts against the 60k ceiling; while the Prius is Toyota's best seller, it also sells hybrid versions of the Camry, Highlander, Lexus RX, and Lexus GS, all of which count toward the limit. Anyway, Toyota will hit the ceiling late in Q2, or early in Q3; the next quarter after that still gets full credits, then the phaseout begins in the following quarter.

    Does anybody know what qualifies as a 'manufacturer' according to the IRS. Is the hybrid ceiling of 60,000 for Ford and 60,000 for Mercury (Escape and Mariner). Or do all Escapes and Mariner hybrids fall under the one manufacturer of Ford Motor Company?

    Alos dones anybody know how many Ford/Mercury hybrids have been sold to date? I know that they have been selling them since 2005.
  • stevedebistevedebi LAPosts: 4,098
    All Ford products are included. However, I don't think Mazda would be included, or Volvo. However it is possible.

    The sales volume began in 2006, and I don't think they have sold more than 20K vehicles this year.
  • wvgasguywvgasguy Posts: 1,405
    As you have discovered the hybrids are mainly for the upper middle class car buyers.

    Just because successful people purchase hybrids doesn't mean anyone can't buy them orht at they are not for everyone. Many Americans purchase vehicles in the $27,000 to $31,000 range. While not mid entry, that is certainly not luxury level and not out of the range of working Americans. These are working Americans who pay taxes, are not under the AMT and indeed can receive a federal tax credit, possibly a state tax credit as well.

    Mt TCH (loaded by the way) after tax credits will be less than $24,000. That and the 37.7mpg I am averaging so far over 2300 miles should make this attractive for many working Americans.

    For me this isn't a Green thing. It just makes sence. The fact that I'm not wasting gas however DOES make me feel better, especially when my credit card bill comes at the end of the month.

    BTW you can make substantially more than $85,000 and still not hit the AMT.
  • nomorebenznomorebenz Posts: 109
    Maybe a good time to let go of some of that appreciated capital. ;)
  • larsblarsb Posts: 8,204
    Let's hope that people were not just buying hybrids because of expensive gas and tax breaks......

    'Yota dropped in hybrid sales by about 4,200 cars after the tax break was halved and gas prices dropped.

    Let's hope this is not a downward trend.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    Almost every debate about the hybrid premium included the tax credit & HOV access as factors in making the difference saleable. I just don't see them selling in big numbers without those incentives.

    If you drive a lot of miles they can possibly be justified on mileage. If you want access to the HOV lanes driving solo there are only a few choices. For CA commuters the Civic GX is a great choice. Yet they only sell in very limited numbers.
This discussion has been closed.