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  1. #1
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    Feb 2007
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    Tax Credit - fight for your rights

    Please, join me to write to the Senate and to the Congress, and to everywhere it might help.

    The problem is already posted by pogli in: http://www.hybridcars.com/forums/jok...dit-t1225.html

    You can find the name and address of your Senator here: http://www.senate.gov/general/contac...nators_cfm.cfm

    Here is the text I prepared to send to the senator of my state:

    - - - - -
    Senator ................... {the Senator’s Name, http://www.senate.gov/general/contact_information/senators_cfm.cfm}
    ................{his address}
    Washington, DC 20510

    Subject: Federal tax incentives for hybrid cars

    02/10/2007

    Dear Senator ............., {the Senator’s Name}

    I bought Toyota Prius in June of 2006.
    I believed the federal government was serious about fuel efficiency and air quality and the promised tax credit (3150$ for Prius - serious incentive) would help to pay the loan we took.

    Recently we looked at the tax forms 1040 and 8910 for 2006 and did approximately the numbers for our family (married filing jointly with two children). It turned out form 8910 discriminates the families with children and we will not get any tax credit for the Prius because we have tax credits for the children.

    The story is described here:

    The IRS websites:
    http://www.irs.gov/newsroom/article/...157557,00.html -
    “Form 8910, Alternative Motor Vehicle Credit, is used to claim the qualified hybrid vehicle credit as well as for vehicles qualifying for other provisions of the alternative motor vehicle credit.”
    http://www.irs.gov/newsroom/article/...157863,00.html
    http://www.irs.gov/pub/irs-pdf/f8910.pdf

    and here:
    http://taxes.about.com/od/deductions...axcredit_2.htm

    From the last website:
    "Limitations on the Hybrid Tax Credit:
    The hybrid tax credit is a non-refundable tax credit. The credit will reduce your regular income tax liability, but not below zero. The credit will not reduce your alternative minimum tax, if that applies to you. Your regular income tax liability is found on Form 1040, page 2, on the line that reads "Tax." For example, this is found on Line 44 of the 2006 Form 1040.
    If you are eligible for multiple tax credits, there are special ordering rules for which credit to take first. The hybrid tax credit is taken last …”

    The formula for your maximum hybrid tax credit is as follows:
    Regular income tax liability minus the total of all other tax credits (among them: Child tax credit; Hope and Lifetime Learning tax credits; Child and dependent care tax credit; Credit for the elderly and disabled …) minus the tentative minimum tax calculated under the Alternative Minimum Tax rules.

    "No Carryover; Any tax liability left over by these reductions will be the maximum dollar limit of your hybrid tax credit. If your hybrid tax credit exceeds your maximum dollar limit, the excess is not refundable, and is lost forever. The excess cannot be carried over to another year, or given away to another person.”

    From the above we can see that the hybrid car tax credit works for very limited cases and the more children one has the lower is the chance to get something from it! The number of children does not lower the alternative minimum tax, but it lowers the tax and increases the child tax credits.

    Can something be done to change the rule: the more children one has the lower is the chance to get something from it?

    My point is:
    If the federal government is serious about reducing the oil dependence, the incentives must be simple, easy to apply and with very limited exceptions.
    The families with children have a lot of city driving, especially in congested school areas. This is a perfect use of a hybrid car and they deserve the tax credit.

    In addition, it is not clear for how long one must keep the car - how to understand on form 8910, page 2, right column "You acquired the vehicle for your use or lease to others, and not for resale".

    After writing about a problem I am feeling responsible to suggest a solution:

    I would call the current situation “bait and switch”. But I will not feel bad if the unused hybrid tax credit can be carried over (100% and one time only) to the next year.
    Another solution is to make the federal hybrid tax credit exempt from the AMT.
    A bigger issue is AMT reexamination.


    Sincerely,

    (signature, name)

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  3. #2
    Junior Member
    Join Date
    Jan 2007
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    Example of this "credit"

    A little FYI for those who read this post. I just finished my taxes for 2006. The credit for a Toyota Prius purchased in the first half of 2006 was touted to be $3150. The actual credit I got after the voodoo tax rules were applied was $638 - which, as I have been told by other Prius owners, was a lot higher than theirs. The other $2512 is simply lost forever. Send your letter, but I can't imagine it will do any good. Our current administration (look at their backgrounds, the overwhelming majority of them are oil men & women) has no real interest in promoting energy conservation. Every hybrid car purchased reduces their profits.

  4. #3
    Junior Member
    Join Date
    Nov 2006
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    i guess i understand it. it basically goes that this credit goes last. the reason why you only got $638 is that your tax liability was $638. your effective tax rate is 0%.

    That's just taxes I guess. When i was in school, i couldn't use all of my lifetime credit because i made too little money.

  5. #4
    Junior Member
    Join Date
    Feb 2007
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    0

    New text added:

    - - -
    . . .
    After writing about a problem I am feeling responsible to suggest a solution:
    I would call the current situation “bait and switch”. But I will not feel bad if the unused hybrid tax credit can be carried over (100% and one time only) to the next year.

    Sincerely,
    . . .
    - - -

    Please contribute more suggestions.

  6. #5
    Junior Member
    Join Date
    Nov 2006
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    i would say just be aware of this and if you are banking on getting a tax credit, make sure your tax liability is that high. you could also try different scenarios like married filing separately/jointly. i think this is more of a tax issue more then government trying to screw you over. if your income tax liability for the year is already 0, then do you really expect the government to take someone else's tax money to give to you?

    i guess a carryover of 1 year would probably satisfy both parties

  7. #6
    Junior Member
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    Feb 2007
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    It is about the AMT limit, not the zero limit

    http://www.hybridcars.com/hybrid-tax...nimum-tax.html

    Form 8910, Line 16:
    "Although you may not owe alternative minimum tax
    (AMT), you must still figure the tentative minimum tax
    (TMT)
    to figure your allowable credit. Complete and
    attach the applicable AMT form or schedule and enter
    the TMT on line 16."


    You do not have to be rich, it affects:
    Single or head of household above $42,500;
    Married filing jointly or qualifying widow(er) above $62,550;
    Married filing separately above $31,275.

    Two or three children with their tax exemptions (multiply $3,300 by the total number of exemptions claimed) plus their tax credits and there is no room left for hybrid car tax credit - the tax gets too close to the AMT or the tentative AMT.

    Before buying our Prius I checked about alternative minimum tax and I found we were not going to be subject of it (AMT) at the end of the year. Now we are still not, but they are hitting us with “tentative” AMT.

  8. #7
    Junior Member
    Join Date
    Nov 2006
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    i change my stance on allowing rollover for hybrid credits. they should change the AMT laws instead....

  9. #8
    Junior Member
    Join Date
    Mar 2007
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    We got screwed too...

    We just found out this weekend that we weren't getting our $3150.00 credit also. It was a combination of everything mentioned above: The AMT and the fact that we have two young kids in daycare. I feel ripped off.

    After reading the fine print, it seems to me that this "credit" was carefully constructed to pay nothing (or as little as possible) to as many people as possible.

    You'll excuse me if I now feel even more skeptical when Bushie talks about additional credits for plug-in Hybrids.

    Tax relief for the middle-class MY A**!

  10. #9
    Junior Member
    Join Date
    Jan 2007
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    Hybrid Tax Credit

    Things aren't always what they seem. The credit wasn't my only reason for buying the HCH, however it certainly was the tilting factor. I did receive the credit, but not 100% of it. It did lower my tax liability to zero and we received 100% of our Federal tax back in our refund (which I will not complain about). We are not wealthy or poor, just middle-class with children. It is still a bit of a stinger to know that the additional credit disappears into thin air!

  11. #10
    Junior Member
    Join Date
    Mar 2007
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    Our Government Lies to Us!

    We purchased a Ford Escape last year, and looked forward to the tax credit of $2600. I just finished my taxes, and the credit has withered to $316.

    It is obvious to me, especially after reading the other comments on this subject, that our government never intended to allow a significant credit to occur. This is another deceitful con-job, blowing in the ear of we environmentalists. Anybody who can afford to pay $3000 extra for a fuel-efficient automobile, has been defined by the tax code to be unqualified for a real credit.

    Our background: no dependents (kids gone), no AMT, normal duductions.

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