Walt, once the IRS certifies the 2005 Escape (purchased new in 2006) for the new tax credit, that will supercede any previous guidance on what tax breaks apply to that model year.

As long as they formally acknowledge the applicability of the new tax credit before your 2006 return is due, you are set.

One thing to think about, however: tax deduction vs tax credits.

In theory a tax credit is "better" than a tax deduction:

- Tax credits are a dollar for dollar reduction in your tax liabilty. If you owe $100 dollars in taxes, and have a $100 tax credit available to you, well then you no longer owe any taxes.

- Tax deductions are simply a reduction in the taxable income, so (assuming you are in the 35% tax bracket) they reduce your taxes only by $.35 per dollar.

HOWEVER, the one drawback to a tax credit is that you can't use it if you don't OWE taxes. And tax credits are one of the last things that are applied when filling out your tax return. So, if you end up with a tax refund, you can't then apply the tax credit to get MORE of a refund. You simply can't claim the credit. Even if you end up owing taxes, but owe less than the amount of your credit, you can't use the full amount of your credit.

That problem is magnified with this particular tax credit because it isn't a carryover credit; you can't "save" it for future years when you may owe taxes (that is the case with many other types of tax credits). You either use it for the 2006 tax year, or you lose it for good.

So you have a tax deduction, which is less of a benefit but can probably be used by more people, vs a tax credit, which is more of a benefit but may not be usable by as many people. Like I said before, in theory the tax credit is much, much better. But in practice, especially with this credit, I think a lot of people are going to be in for a rude awakening when they try to fill out there 2006 return.

That's why I have been doing everything I can tax actually increase my potential tax liability for 2006. My wife and I have historically been a fan of the big fat refund check (even though it makes no sense from a "time value of money" perspective), but no more.