Tax Credit Clarification Needed

First, I am currently a Prius owner with a Hymotion kit installed, and this is my first post here for the Nissan Leaf. I started to consider switching the 2nd Prius for the Nissan Leaf, and that is why I'm posting. I don't want to dim any enthusiasm for the Leaf, but if people have put a 100% trust in the government's word, I wanted to give a possible warning based on what happened to me.

Back in 2005 the Prius also had a $3750 tax credit. It was so new that I don't know if the IRS had even published the rules. But I was enthusiastic about the Prius, and besides, the government was giving this great tax credit.

Well, it wasn't EXACTLY like that. Once 2006 came and it was time to do the taxes, things had changed ever so slightly. Yes it was a "$3750 tax credit," but only under special circumstances. You had to calculate your "Tentative Minimum Tax" which was another interesting project. Then, if you did all that, you found out that if you had children and took a tax deduction for them, which is what has always been allowed, then you really didn't deserve the "$3750 tax credit" according to the government. You couldn't even carry the credit forward for another tax year, so if your financial situation changed in a future year you were still out of luck.

Now, on this dangling tax credit, it is my understanding that in order to qualify, you must have a tax bill of $7500. That would mean a taxable income, after all deductions, of about $45K if you're single, and $55K if you're married. Has anybody researched what effect any deductions have on this tax credit? And, am I correct that this credit too cannot be carried forward and must be claimed in the tax year the Leaf was purchased?

There were so many questions about the tax credit with the Prius that a special section was created just for those questions.

sub3marathonman said:

Then, if you did all that, you found out that if you had children and took a tax deduction for them, which is what has always been allowed, then you really didn't deserve the "$3750 tax credit" according to the government. You couldn't even carry the credit forward for another tax year, so if your financial situation changed in a future year you were still out of luck.

Now, on this dangling tax credit, it is my understanding that in order to qualify, you must have a tax bill of $7500. That would mean a taxable income, after all deductions, of about $45K if you're single, and $55K if you're married. Has anybody researched what effect any deductions have on this tax credit? And, am I correct that this credit too cannot be carried forward and must be claimed in the tax year the Leaf was purchased?

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You honestly aren't bringing anything to the table we don't already know. Except that it's clear you failed to do your homework before buying your Prius.

So....a) Yes we have and b) Yes it must.

mwalsh said:

You honestly aren't bringing anything to the table we don't already know. Except that it's clear you failed to do your homework before buying your Prius.

So....a) Yes we have and b) Yes it must.

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Well a big thank you for that answer. Over at the Prius board I'm not used to jerks such as mwalsh.

So tell me what you expect? I'm sorry, but your post makes it sound like you're just here to plant FUD. Explain exactly what you still don't understand and I'll go out of my way to clarify for you.

What I am asking, which I could not research here because the search feature said "tax credit" was too generic, is what happens to the $7500 tax credit when you also take certain deductions, such as for a child.

And, for further clarification, my research for the 2005 Prius was extensive. I did check into the tax credit, but it was always stated it was a $3750 credit. As I said, which apparently wasn't read, was that the rules were not made clear back then by the IRS or Toyota, either intentionally or by accident. As I said too, a special section was even created, I believe long after 2005, for such tax questions. Further, really the only thing I was trying to "bring to the table" here was to hopefully prevent somebody from repeating my mistake. From the reading I have done here, which I admit is not extensive, is that people are automatically figuring on the tax credit.

So I guess I should't care about it if it doesn't affect me? Or should I just tell people that they "didn't do their research" if they get shortchanged on their anticipated refund?

I was also hoping to find out from somebody who had done the research already the situation for this tax credit. That is the way it has been over on the Prius sites, experts were willing to help new people, not give them a derogatory answer. Especially one who stated that it was their first post. That is why I never expected such a situation here.

And for further clarification, I said initially that I was thinking of selling the 2nd Prius and getting a Leaf, another point which apparently wasn't read.

sub3marathonman said:

What I am asking, which I could not research here because the search feature said "tax credit" was too generic, is what happens to the $7500 tax credit when you also take certain deductions, such as for a child..

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The same as would happen for the tax credit on the Prius. You said it yourself - "...you must have a tax bill of $7500. That would mean a taxable income, after all deductions..."

Short answer as I understand it. The $7,500 tax credit is not limited by AMT (Alternative Minimum Tax). Like your Prius credit, it can not be carried over. The EVSE tax credit is currently not allowed if you pay any AMT. It also can not be carried over.

This has been discussed before, but since the search on this forum won't let you search on "tax" or "credit" or "tax credit", it is understandable that you did not want to wade through old posts to try and find if this had already been talked about.

Thank you JasonT. That is the simple, and friendlier answer, to the question I asked. I appreciate your help.

(And it is a nice feature that this board notifies a person composing an answer to a topic when another post has been made in the meantime.)

See here also as a starter:

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

Also, as a tip on your search, try more search words, i.e. "7500 federal tax credit".
It'll still give you a boat load of results, but at least it'll give you something to wade through.
Doing so, I found this:

http://www.mynissanleaf.com/viewtopic.php?f=4&t=283

sub3marathonman said:

That is the simple, and friendlier answer, to the question I asked. I appreciate your help.

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Certainly. I do understand MWalsh's point, to an extent. This issue has been discussed a couple of times here and it is frustrating on forums to keep going over the same topics. But if you're not a daily reader you may miss those things. Combine that with a search that is very frustrating due to all the words it limits, and I'm a lot more forgiving on this forum for repeat topics.

Another search to try (which is allowed): AMT

The Prius tax credit dates all the way back to the introduction of the model (albeit at a $2000 level), so there was nothing new about it in 2005.

And I've been looking at the OP's posts on priuschat.com - no interest in the LEAF on that forum and no indication that he's thinking of selling a Prius either. Or anywhere else on the Internet under that same user name, for that matter.

Call me crazy, but with the perceived tone I read into the original post, I'm going to remain skeptical of the motives here until convinced otherwise. And you know me....I'm a fairly even bloke in about 95% of circumstances.

sub3marathonman said:

Back in 2005 the Prius also had a $3750 tax credit. It was so new that I don't know if the IRS had even published the rules. But I was enthusiastic about the Prius, and besides, the government was giving this great tax credit.

Well, it wasn't EXACTLY like that. Once 2006 came and it was time to do the taxes, things had changed ever so slightly. Yes it was a "$3750 tax credit," but only under special circumstances. You had to calculate your "Tentative Minimum Tax" which was another interesting project. Then, if you did all that, you found out that if you had children and took a tax deduction for them, which is what has always been allowed, then you really didn't deserve the "$3750 tax credit" according to the government. You couldn't even carry the credit forward for another tax year, so if your financial situation changed in a future year you were still out of luck.

Now, on this dangling tax credit, it is my understanding that in order to qualify, you must have a tax bill of $7500. That would mean a taxable income, after all deductions, of about $45K if you're single, and $55K if you're married. Has anybody researched what effect any deductions have on this tax credit? And, am I correct that this credit too cannot be carried forward and must be claimed in the tax year the Leaf was purchased?

There were so many questions about the tax credit with the Prius that a special section was created just for those questions.

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Last, first. Good idea about the tax credit section.

I've tried several ways to vary my income by rolling out some pre-tax money to pay for this bucket. But no matter how hard I try, I just can't make all the $7500 stick. Plus, the State of California had an unpleasant surprise in store for me.

I too tried to get the Prius tax credit and came up short on it too.

So, I would say you are correct about saying getting all the $7500 is a lead pipe cinch being in error. Being in error never stopped a car salesman (or company in this case) or carnie barker. Hell, on Saturday I was told that the Leaf won't cost that much, after all you'll get $7500+$5000, etc.

sub3marathonman said:

Well a big thank you for that answer. Over at the Prius board I'm not used to jerks such as....

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lol at TOS reference. They're all over here now. Just the one's with enough money to out-smug you.

And jebus, whatever you do don't mention Polar Bears or the word charger.

The issues raised are important if you buy the Leaf. If you lease it from Nissan, Nissan takes the $7,500 tax credit and gives you $7,500 up front as a deduction from the cost of the Leaf when figuring your lease costs. In California the $7,500. is subject to sales tax

Mods, maybe a sticky for the topic "Tax credits and rebates" under Newcomers or Buying/Leasing/Dealers?

Just something straightforward for new members detailing the requirements to get the full $7500, that the tax credit is not limited by the AMT, the lack of refundability, that lease rates include the full $7500 buydown by Nissan, that the EVSE tax credit is limited by the AMT, and that rebates such as the California $5000 are not tax credits and are limited to funds available.

Just a thought triggered by this thread.

JasonT said:

sub3marathonman said:

That is the simple, and friendlier answer, to the question I asked. I appreciate your help.

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Certainly. I do understand MWalsh's point, to an extent. This issue has been discussed a couple of times here and it is frustrating on forums to keep going over the same topics. But if you're not a daily reader you may miss those things. Combine that with a search that is very frustrating due to all the words it limits, and I'm a lot more forgiving on this forum for repeat topics.

Another search to try (which is allowed): AMT

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Or read the IRS docs (scary) as many have and info on the web, google is everyone's friend The AMT par tis more difficult to find without a bit of digging.

OK, first I will state that I truly regret signing up and posting in this forum. And yes, I do think the personal attacks which began within 7 minutes do violate the rules of the forum. And yes, I do regret coming back here, but I will explain why I did.

Now examine the facts.

First, I posted about a costly mistake I made when purchasing my 2005 Prius. Would I tell this to people I don't like? Wouldn't I know that, if they were low enough, they could say, "Ha, ha, what an idiot you are. You lost $3750." That is why I was so surprised when exactly that happened, within 7 minutes I would add.

Second, I didn't know I was supposed to run it by mwalsh and/or announce it on PriusChat that I was thinking about selling a 5-year-old Prius. I think the PriusChat members who weren't polite would have a good laugh, and those who were polite would wonder what I was talking about. Also, having mwalsh research what I've said on PriusChat, and even the rest of the Internet, and then proudly announcing, with a 95% certainty no less, that I am a liar because I never posted anything in the Leaf section is extremely creepy. I guess I should have told him I did read a couple of posts there, maybe the PriusChat moderator could confirm that?

Then, finding out that mwalsh also was on PriusChat, having joined 2 years after I did, I started thinking that maybe he would state here that he had jumped to an incorrect and too harsh conclusion, so I came back to look. Instead he calls me a liar, but in a very nice way. I don't recall mwalsh flaming people on PriusChat when they've asked simple questions. Also, I used to frequent Prius Online long before I joined PriusChat, and I don't recall any discussions about a tax credit back earlier than 2004. But I'll research it because it is possible.

It reminds me of when we moved into our new house. It was about midnight before we finished. We were really happy of course. Well, the very next day, at 9 a.m. no less, there was the president of the subdivision knocking on our door. Wow, he was coming to welcome us to the comunity!!! NO, he stated that I better get that trailer out of the comunity fast or they were going to tow it away. Yes, there were only a few houses in the community at the time, about 10% of the houses were built. Oh, and the trailer was sitting there because it had gotten a flat tire from all the nails strewn all over the subdivision road because of all the building. But that didn't matter, it was his rule. And it made a large statement about the type of person he is. So it really put a negitive start to what should have been a happy time.

And it is a similar case here. Yes, we were just starting to think seriously about the Leaf, and yes, I didn't think it would be a big deal to just ask a simple question, explaining that I was new to all of this. And I did do the search, however with just tax and credit, not "tax credit" so I don't know if that would have made a difference. And yes, the thought of driving a truly electric, no gasoline car would be spectacular. (Long ago I wanted to convert a Plymouth TC3 to all electric, but it burned up before I could start on the project.) But then you run into somebody like mwalsh. And maybe Clippy too, since I don't know what the "out smug you" is all about. But mwalsh never said, "Welcome to the Forum," "Hey, we're glad you're interested in this great car that we love." Instead, within 7 minutes I might add, there was mwalsh with the personal attack.

Thankfully there were a couple of people who are helpful, and that help is appreciated. And some have even said that my idea to create a new section might be worthwhile. But it still remains that mwalsh somewhat wrecked what was and should have been a pretty good day.

EVDRIVER said:

google is everyone's friend

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Call me crazy, but a few months back I typed in the following google search:

keywords site:mynissanleaf.com

It didn't return any answers *, but I bookmarked it anyway and I use it quite frequently. I click it, and then type over the first word with whatever I really want, then search again.

* Actually, if you try it now, it will probably return two answers, one of which is this post.

mwalsh said:

The Prius tax credit dates all the way back to the introduction of the model (albeit at a $2000 level), so there was nothing new about it in 2005.

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This statement, at least from what I can find, is false. As I remember it too, the rebates started in 2005 for the 2005 Prius. At the time they were $3150, not $3750 as I was now thinking.

Here (from Google) is the website: http://www.fueleconomy.gov/feg/tax_hybrid.shtml
You have to click on "Toyota" and then on 2005. It is a bit confusing, the way they have it written it appears as "Jan.1 - Sep. 30, 2006" for the 2005 model year. What I believe it should be is Jan. 1, 2005. (Edit: I have found out that this is incorrect, it should be Jan. 1, 2006)

Also, as a side note, Google in 2010 is not what Google in 2005 was. I'm not sure the IRS even had the tax forms online back in 2005. Once again, I'm not sure, but it is possible. And, while I'm thinking about it, if I remember correctly, when I was checking into the 2005 rebate somewhere, I think it was at the IRS website though, it said that the specific rules would be published at a future date.

planet4ever said:

EVDRIVER said:

google is everyone's friend

Click to expand...

Call me crazy, but a few months back I typed in the following google search:

keywords site:mynissanleaf.com

It didn't return any answers *, but I bookmarked it anyway and I use it quite frequently. I click it, and then type over the first word with whatever I really want, then search again.

* Actually, if you try it now, it will probably return two answers, one of which is this post.

Click to expand...

Googling a url does not always work well, if you knew the URL entering it would have been a direct hit. I have found almost every single answer on my tax questions re the Leaf via Google or links on the Nissan site. Knowing how to search at times can make a big difference and luck as well I usually find a search to other articles with relevant links as a quick way to get what I need as well. If that fails I go to the magic eight ball.

OK, I have found the tax deduction (not tax credit) that was available for earlier model years.

"This tax credit replaced 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."

This quote was from: http://www.irs.gov/newsroom/article/0,,id=163103,00.html

Also, what I previously posted is incorrect. It really should read Jan. 1 - Sep. 30, 2006, with Jan. 1 being Jan. 1, 2006, for the 2005 Prius and the 2006 Prius. It has been so long ago now.