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  1. #11

    2006 Tax Credit on a leased vehicle

    I am trying to make sure of something. If I take possession of a NEW 2005 Prius in 2006, do I qualify for the 2006 tax credit?

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  3. #12

    2006 Tax Credit on a leased vehicle

    If you are the ORIGINAL owner - or lessor- of a 2006 qualified hybrid, you will be eligible for a two-part TAX CREDIT - (1) The Fuel Economy Credit ranges between $400-$2,400 based upon the fuel efficiency and type of vehicle and (2) The Conservation Credit ranges from $150-$1,000 for the first 60,000 vehicles sold. If you lease the vehicle, you are also eligible for this tax credit. (In prior years, the clean-fuel vehicle deduction was only for purchasers.) this is a NEW TAX CREDIT for 2006 - different from the clean-fuel vehicle income deduction.

  4. #13

    2006 Tax Credit on a leased vehicle

    What if I'm not the original owner but I purchase a Prius in 2006, can I take the 2006 Tax Credit because of my purchase? I'm having trouble interpreting the Energy Policy Act text.

  5. #14

    2006 Tax Credit on a leased vehicle

    You must be the first owner of the vehicle. It doesn't matter when it was manufactured. It does matter when you put it into service or take possession (after Jan 1).

  6. #15

    2006 Tax Credit on a leased vehicle

    So if I buy a 2006 Prius before Jan 1st, then I get nothing? The 2006 Prius isn't mentioned in the documentation for the '05 $2000 deduction, only the 01-2005 models. The '06 is only mentioned if purchased after Jan 1st.

  7. #16

    2006 Tax Credit on a leased vehicle

    If you purchase a new Prius prior to 1/1/06 - I doubt you could find a 2005 - you will get a $2000 deduction. If you wait until 2006 and purchase it before Toyota sells 60K units, you get a much higher tax credit. The deduction won't save you much, but the credit will as long as you don't get caught by AMT.

    The credit is only for new vehicles purchased (not leased) after 1/1/06. See www.toyota.com/prius and click the Federal Tax Benefits link.

  8. #17

    2006 Tax Credit on a leased vehicle

    Well, I've got one more question. How are the Feds going to keep track of how many vehicle models have been sold. As I understand it, the deduction for 2006 only applies to the first 60,000 of each model sold. So, if I walk into a dealership in March say, and I want to buy a Civic Hybrid and get the tax deduction, how will I know whether my purchase will qualify? In other words, how will I know if 60,000 units have already been sold?

  9. #18

    2006 Tax Credit on a leased vehicle

    From what I understand the first 60,000 rule is based on the quarters of the year. 100% credit up until the quarter that the 60,000 vehicle is sold. After that the percentage decreases from quarter to quarter until 0% is reached for a credit. So even if your vehicle is the 60,001 vehicle sold if it is still the same quarter as the when the 60,000 vehicle was sold then you will get a 100% credit. The manufacture will report to the IRS which quarter the 60,000 vehicle was sold in.

  10. #19

    2006 Tax Credit on a leased vehicle

    I've been looking at this in detail as well. The only definitive answer I've found is actually for the state of CO as follows:

    "Lessees of qualifying vehicles are eligible for the alternative fuel vehicle credit. The available credit is calculated by subtracting the value of the vehicle when the lease expires from the cost of the vehicle to the lessor at the time of the lease transaction (capitalized cost), and dividing that amount by the cost of the vehicle to the lessor at the time of the lease transaction. This percentage is then multiplied by the qualifying expenses to determine the amount of the expenditure that can be used in computing the amount of the credit. Only the lessor or lessee of the vehicle may claim the credit. If the vehicle is converted at the factory, the lessor has the option of claiming the credit or passing the right to claim the credit to the lessee. If the lessee converts the vehicle, then only the lessee may claim the credit."

    See http://www.revenue.state.co.us/fyi/html/income09.html for more details.

    CO, in my experience, handles things similar to the Fed, so you'd better make sure Toyota Motor Credit, Honda Motor Credit, etc. that acts as the lessor gives you something in writing that they won't take the credit when you lease the vehicle if you plan on taking the credit yourself.

  11. #20

    2006 Tax Credit on a leased vehicle

    Here is an article published about 6/7/06:

    Toyota hybrid sales hit tax credit ceiling
    By Matt Nauman
    Mercury News
    Toyota has sold more than 60,000 hybrid cars and sport-utility vehicles so far this year, enough to reach a government threshold that reduces the federal tax credit on those vehicles.
    The good news for motorists weary of high gas prices is that the tax code is written so the 100 percent tax credit isn't reduced to 50 percent until the quarter after the one in which the 60,000-unit sales mark is reached.
    That gives buyers from now until Sept. 30 to purchase one of the five gasoline-electric hybrid models sold by Toyota and its upscale Lexus division and still qualify for the 100 percent credit. On Oct. 1, the credit will be reduced by half.
    ``The credit amount is based on the purchase date of the vehicle,'' said Jesse Weller, a spokesman with the Internal Revenue Service in Oakland.
    The credit will stay at 50 percent for two quarters, fall to 25 percent in the subsequent two quarters, then expire. For Toyota hybrid buyers, the tax credit expiration date is Oct. 1, 2007.
    But, as Toyota spokesman Sam Butto said, ``You never know what will happen in Washington.''
    Ford and Honda, the other two hybrid manufacturers, aren't near the 60,000-unit threshold so far this year.
    In addition to purchase date, the full credit amount also varies by vehicle. It's $2,100 for a 2006 Civic Hybrid, $2,600 for a two-wheel-drive Ford Escape hybrid and $3,150 for a 2006 Prius. The credits, which replaced a previous deduction, are intended to encourage people to buy cleaner-burning, higher-mileage hybrid vehicles.
    That's also why California allows certain hybrids, including the Toyota Prius, Honda Civic Hybrid and some Honda Insight models, into high-occupancy-vehicle lanes with just the driver.
    But California's program has a cutoff point, too.
    The last HOV sticker issued to a hybrid owner will be No. 75,000. Department of Motor Vehicles spokesman Steve Haskins said that through Tuesday, the state has received 64,811 applications and issued 56,775 stickers. It has rejected 606 applications as not eligible.
    The state's supply of carpool-lane stickers will probably run out by the end of summer.

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