[Lark]

I may have the chance to buy a used (2004) Prius, and was wondering if the tax credit would be available on the purchase. The dealer thought so, but I am not so sure. I assume that the original owner took his tax break, but d/n know for sure.

 

[MRMOTH1]

The tax credit that's part of the President's energy bill only aplies after January first. It involves any 2006 hybrid. They'll use a formula to calculate your tax credit. Keep in mind that this is a true credit and not a deduction. BIG difference$$$$$. The latest I heard from a pretty good source was $2750.

 

[Lark]

My understanding is that there is presently a tax credit, and that the 2006 issue extends, rather than reduces the credit as was scheduled to happen. I guess my question is to people who have purchased a used Prius and their ability to receive a tax break of any kind.

I understand about the 2006 issue, but am not planning to buy a 2006. I have this opportunity, probably this week, and was wondering if this may serve as a negotiating point. Thanks

 

[JDavies]

2004 Tax Credit

I may have the chance to buy a used (2004) Prius, and was wondering if the tax credit would be available on the purchase. The dealer thought so, but I am not so sure. I assume that the original owner took his tax break, but d/n know for sure.
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According to IRS instructions you must be the ORIGINAL Purchaser of the car to get the deduction.

 

[Lark]

"According to IRS instructions you must be the ORIGINAL Purchaser of the car to get the deduction."

Nuts, I was afraid of that. Thanks J for answering.

 

[DanMan32]

First, a clarification. The current tax break is a DEDUCTION not a credit. A deduction is when part of your income is shielded from being taxed. If you already paid tax on it, you get a refund. So for a $2000 deduction, you get maybe $300 in reduced tax.

A tax CREDIT is not shielding your income from tax, but rather the government 'paying' part of the tax for you. So a $2750 tax credit, you get $2750 reduction in your tax, assuming AMT doesn't kill it all for you.

Currently, for the 2005 tax year, the break is a deduction. It was supposed to be $1000 deduction but a tax bill applied last year suspended the phase-out of the deduction for 2004 and 2005 tax years, allowing the full $2000 deduction for hybrids.
As of 2006, the deduction has been replaced by a 'limited edition' tax credit for hybrids based on their efficiency. I say 'limited edition' because the credit ends after a certain period after a manufacturer sells 60,000 hybrids after the beginning of the 2006 tax year.

Both apply to new car purchases. The deduction doesn't apply to leases either, I am not so sure about the new credit, but I think leases are excluded there too.