Tax credits / incentives for hybrids?

ryandenver · September 2005

Ok you have a point, but I'm only into my WRX loan a year. I bought the lease out last year, so the first few years of leasing are sunk costs regardless. So, yes, 1 yr of payments is sunk and I'd have a year of additional payments on the hybrid. But considering month for month with with the assumption that I"d have a payment regardless, it comes out with a savings. I typically don't keep vehicles long enough to pay them off anyway.

As for being in the market for a new car, I am. My WRX is not large enough to carry my snowboard gear internally and as I compete around the US and Canada on the NorAm tour, I need something I can haul my gear in with passengers without having to use a roof rack and expose my boards to road chemicals which eat it alive.

As for xplan, each dealer invoice for the hybrid, mustang, etc has the xplan price listed. It is up to each dealer whether they honor it or not on any vehicle at any time. Before ford redid the ford partner website and began the employee pricing deal, it also listed xplan on all dealer inventory right on the website. Some dealers here are honoring the price and some are not just as some are charging MSRP and some are charging MSRP plus 5k. There's one dealer in the Seattle area that is honoring A-plan to the public on them as part of the current Ford promotion. All I can say is shop around if you qualify for either promotion.

kentmoon · October 2005

I plan to lease a hybrid car. Do you know if tax incentive will apply if I lease the car instead of purchasing one?

falconone · October 2005

Only if you buy. Doesn't pay to lease.

larsb · October 2005

quote aaron_t-"Does anyone know if a second owner is elibile for the 2006 tax credit or does this only apply towards first time titled?"-end quote

Tax credit is applicable "only for the first time use as a new purchase" of the vehicle. No used hybrid or leases qualify.

larsb · October 2005

http://www.chron.com/cs/CDA/ssistory.mpl/business/energy/3408619

gagrice · October 2005

I would not spend that tax credit till you see it on the IRS website. The state of Alaska has already had two big projects postponed/cancelled due to the hurricanes. Money slated for one bill can be used on other things as Congress sees fit. If Congress decides that the hybrids don't need any help, they can defer that money to other bills. It may be wise to take the existing deduction and get your hybrid before the end of the year.

NOTICE: New legislation has changed the tax incentives for hybrid vehicles. Hybrids placed in service by December 31, 2005 are still eligible for the tax incentives described on this page. Hybrids placed in service after this date will no longer be eligible for these deductions but may be eligible for a federal income tax credit under new legislationthe amount will depend upon the vehicle's fuel economy, estimated fuel savings, and other factors.

http://www.fueleconomy.gov/feg/tax_hybrid.shtml

larsb · October 2005

quote gagrice-"I would not spend that tax credit till you see it on the IRS website."-end quote.

Depends on how fast you file your return. If you get the car on Jan 7th, file your taxes on Jan 10th, you can bet your bottom dollar you will get the tax credit.

Once you file, the credit is yours. There are no "take backs" at that point.

gagrice · October 2005

Did you read the notice? NO credit has been established under the new legislation. How can they determine the gas savings on a Prius when it does not replace an existing gas only model? When any other car is compared to the Prius here on Edmund's it is touted as incomparable. Don't you think the IRS people determining the credit will have a difficult time making that determination? It was simple under the old incentive. You buy a hybrid on the IRS list you get the $2000 deduction. I think that bill has created more questions than the IRS will have answers for. We should know by about the first of December.

falconone · October 2005

Most are guessing that the credit for the Prius will be from $3k to 3.2k. It will be interesting what the final numbers actually are. I have no idea why the IRS would even get involved in the determination. That's are DUMB government at work.

kdhspyder · October 2005

The details matter greatly.... if you take delivery on Jan2 2006 then likely(?) the credit will be allowed on your April 15 2007 tax return.. a year later.

The govt will have your $3k(?) interest-free for a year or more. Lots of details to sort out.

larsb · October 2005

Yep, you are absolutely correct. The current (2005 calendar year purchase) puts your tax deduction with the 2005 tax filing, which is done in 2006.

So the 2006 Calendar year purchase will put your tax credit in with the 2006 tax filing, done in 2007.

I sit corrected !!!

My overall point, however, was thatGary had pointed out how one might need to be worried that the tax refund might get changed or reduced or eliminated, and my point was that if it is ON THE BOOKS as a valid deduction WHEN YOU FILE, then you are guaranteed to receive it. The change in tax laws cannot modify your current year's filing after you have submitted it.

stevedebi · October 2005

Yep, unless Congress changes the law (unlikely), the credit wll be available. It is now signed into law.

falconone · October 2005

http://www.aceee.org/transportation/taxcredits06.pdf

stevedebi · October 2005

Thanks for the link, but I think everyone here is waiting for the IRS to weigh in.

falconone · October 2005

No prob.

How much different do you think the IRS will be?

gagrice · October 2005

How much different do you think the IRS will be?

It is a crap shoot. You know that Honda will pitch a fit if they use the flawed EPA estimates on mileage. My question is what comparable vehicle from 2002 did they use for the Prius calculation? If they use the first generation of Prius there is little gain in mileage with the Prius II. It may even be as long as late next year before they make the determination. You won't be able to claim it until January of 2007 for the 2006 tax year. A lot can happen in that length of time.

falconone · October 2005

True.. but I am not buying the car for a tax credit. Whatever they give me I'll take.

kdhspyder · October 2005

Here is a question I have not seen answered and cant google an answer for either. Forgetting what the actual credits will be is there any statement that anyone has found about how MANY vehicles one taxpayer ( joint ) may purchase and still receive the credit. Can a H/W each purchase a hybrid and claim 2 credits? Must they file separately that year? Can a parent purchase hybrids for all his children ( 10? ) and claim 10 credits?

gagrice · October 2005

Good question. I could buy 10 Prii reduce my taxes to zero, then sell them all at a profit on eBay, hmmmmm

falconone · October 2005

Ya know Gary... you may have something there! I am sure there is a limit on how many deductions you can take. If not, you should really think about it. The problem is you'd have to register and insure every one.

gagrice · October 2005

I imagine that will be watched by Uncle Sam. It is a good question though. And I would hate to get stuck with ten Prii and the bottom fall out of the market.

kdhspyder · October 2005

I think this may be part of the reason that the IRS has not published anything yet.. The details are everything.

If it is ONE Credit per return, joint or separate, then if one person or family purchases say, a Prius, Camry and Highlander.. then only one vehicle counts toward the 60000 unit cutoff ( which one? )... details, details, details. That is why there is a full credit for one quarter AFTER the 60000 limit is attained.

Scenario: ( As I understand it )
70000 units are delivered in the first 2 qtrs of 2006 but only 60000 get the credit due to multiple vehicle purchases by the same taxpayer... now EVERYONE who gets a Hybrid in 3rd quarter gets the credit unless they also got one in the previous two quarters ( or the 3rd Qtr ).. details, details..
So 'Yota, Honda et al, have to report their Hybrid RDR's to the IRS every quarter to tell the Feds when the probable 60000 limit is reached.. wow.. more details..

gagrice · October 2005

I think this may be part of the reason that the IRS has not published anything yet.. The details are everything.

As if the tax code is not complex enough as it is. I think it was simpler the way it was. I would imagine each manufacturer will have to promote their vehicles as they did with the current deduction. I don't think the IRS will publish the credit until the end of 2006 as part of next years tax code. The information that comes out the end of this year is for your 2005 tax return. So the IRS will have all next year to hash it out.

kdhspyder · October 2005

Yep I believe you are spot on this.

falconone · October 2005

http://tinyurl.com/c4hpn

otis1 · October 2005

like someone said, let's wait to see what the irs says. but here's my take:

re: claiming 10 prii credits- i think I remember reading that you can only claim the credit on cars that you plan to drive- not cars that are for resale. so if you run business and have 10 company cars- then that's ok. if you buy 10 cars and sell 9 on ebay, that's doesn't count.

re: comparison to non existant 2002 model: the credit is based on the 2002 numbers for EPA gas mileages for various weight classes. so you're not comparing a 2006 honda civic hybrid to a 2002 gas civic- you're comparing the city mileage of a 2006 civic hybrid to corresponding weight class mpg from the 2002 data. currently I don't understand how this weight class is determined (I actually went into the us laws that were referenced in this new energy law and couldn't find the info).

re: 60k limit- look back a few pages on this forum, the credit gets phased out 2 quarters AFTER the quota has been reached.

Here's my idea on what toyota should do. I think they are projected to sell over 200k hybrids next year. that means they could easily sell over 50k hybrids in the first quarter alone. with the new tax credit, its not inconceivable that demand will be much higher and they could easily blow the 60k quota in the first quarter alone leaving only Q2 to take advantage of the full credit. Toyota should HOLD BACK sales of hybrids to 59,000 hybrids in Q1. that way they have until Q3 (sept 30) for customers to take advantage of the hybrid credit. they'll sell more cars this way because toyota gets an extra 3 months to sell "discounted" hybrids.

THe added benefit of this is that by Q4, the camry should be ready to help "revitalize" hybrid sales (plus they'll get 50% of the credit- not too shabby). my hope is that the 2007 HH will be available by Q1 2007 so I can get the 50% credit then.

veliger · November 2005

I'm amazed congress (both parties) has so eagerly gulped down the hybrid Kool-Aid. It's bad enough self righteous do-gooder greenies get a tax break for sending money to Japan (the nation with worlds WORST environmental record). Then they have to give my tax money to the rich folks buying the RX400h. The fact that any car over 25K qualifies for any tax break is ridiculous. The fact that the extremely wealthy can buy an RX400h and get a tax credit on their 50K car is just obscene. This calls for a new term the "Welfare Fat-Cat Environmentalist". I can't wait to meet my first RX400h owner to give him or her a very hard time. Hypocrisy knows no limits in the good old USA! :mad:

veliger · November 2005

The details matter greatly.... if you take delivery on Jan2 2006 then likely(?) the credit will be allowed on your April 15 2007 tax return.. a year later.

The govt will have your $3k(?) interest-free for a year or more. Lots of details to sort out.

The entitlement mentality is alive and well. Spyder has already decided the special tax credit for buying a hybrid is "his" money. The poor folks who buy a new Echo or Aveo get no help with a tax credit, but the middle class and up get their feel-good hybrid tax credit and already consider it an entitlement. :sick:

falconone · November 2005

Echo is unavailable anymore. The Yaris has taken its place. Do you want a tax break on a $10k bare bones car? People that are getting the tax break are spending anywhere from 21k-27k for their Prius. Chances are, they will get mid 40's in city driving. Most you can get in an Aveo would be high 20's if you're lucky.

kdhspyder · November 2005

It is my money if I decide to buy a Prius just as it's your money if you also decide to buy one. It's always a personal decision. You can take advantage of it or not.

The Prius is more efficient than an Aveo or Yaris in both FE and emissions. It deserves to be supported so that less efficient gassers get taken off the road. The person buying my '00 4c Camry (33 mpg) is coming out of a '95 V6 Astro Van smoker. So my future Prius is replacing a clunker. We all benefit from this exchange. I started it with a new purchase. Thats what we need to do more of.

kdlu · November 2005

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.

kdhspyder · December 2005

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.

nilesboy · January 2006

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.

jrct9454 · January 2006

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...

mirth · January 2006

...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?

jrct9454 · January 2006

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.

kdhspyder · January 2006

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!!!!!

anniemfuse · April 2006

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.

stevedebi · April 2006

"...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.

lvbaum · April 2006

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.

rota · April 2006

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?

lvbaum · April 2006

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.

gagrice · April 2006

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.

jrct9454 · April 2006

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.

kdhspyder · April 2006

42175 hybrids 'sold' through 3-31-06. 60,000 limit is expected in May

nymaxx · April 2006

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

gagrice · April 2006

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

jrct9454 · April 2006

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.]

wvgasguy · May 2006

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

cybersaurusrex · May 2006

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".

Tax credits / incentives for hybrids?

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