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I know this has been addressed here before, but I can't seem to find the answer via the search function.

I have a 2006 Prius on order to be delivered in early January. If I do so, I will be in line for the tax credit of around $3000 when I file for 2006 taxes in 2007.

Twice in the last week, my dealer has called to say he had a 2006 available for immediate pickup in the color and option package I want. Twice I've told him I prefer to wait. My question is "What is availabe tax wise IF I told my dealer I would accept a car now. I believe the sales tax deduction expires at the end of this year. If that is true, that deduction would be available. I also seem to remember that there is either a smaller tax credit or perhaps it's just a deduction (which give it a LOT less bang for the buck.)

Can anyone shed any more light on this situation?
 

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As far as federal goes, it is a $2000 deduction for 2005 tax year. More accurately, it is an adjustment to gross income, just like a non-roth IRA.
 

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FYI

Correct as always.......... If you purchase the Prius Before or on 31Dec 2005. You go to line 16 on your 2005 Tax Return Form 1040 and Deduct $2,000.00 from Your Taxable Total and THEN go find your Tax Owed.
 

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New (not used) Prius purchased (not leased) prior to and including Dec. 31, 2005 are eligible for the US Federal Clean Fueled Vehicle Income Tax deduction of $2000 in the tax year that you purchased your Prius. (What is offered on your state income taxes will vary by state and tax year.) For tax year 2006, I think it goes down to $500.

See IRS Publication 535 "Business Expenses" chapter 12 for more information on filing. (You do not need to itemize to take the deduction, nor do you need to be a business (the IRS just stuck it in that publication because they felt like it).) However, since it is a reduction of gross income, the amount off of your taxes owed will depend on what tax bracket you are in, and if you have no taxable income or if you are hit with AMT you may not be able to take the deduction.

For more information, please see:
http://www.toyota.com/prius/tax.html
http://www.irs.gov/newsroom/article/0,, ... 49,00.html
http://www.irs.gov/newsroom/article/0,, ... 66,00.html
http://www.irs.gov/publications/p535/ch12.html
http://www.fueleconomy.gov/feg/tax_hybrid.shtml

For vehicles purchased on or after Jan. 1, 2006, they are eligible for the new hybrid tax credit that was in the recently signed Energy Bill. (A credit is a dollar for dollar reduction of the taxes that you owe, and you might even get a refund...) There's some convoluted formula for determining eligibility (how the fuel economy compares to a 2002 model, and how much fuel it conserves over 120,000 miles), along with a phaseout provision starting the quarter following the 60,000 vehicle sold, so I can't tell you how much a new Prius purchase in calendar/tax year 2006 will give you. http://www.aceee.org/transportation/taxcredits06.pdf puts the Prius at about $3150.
 
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