just bought an 05 prius this weekend. Was excited to hear about the $2,000 dollar tax credit. If you buy after 2006 they are giving you even more money. Check out this link. I believe prius owners buying after the new year get 3150 if I remember right. BUMMER for us who just bought.

http://hybridcars.about.com/gi/dynam...ed.htm%23table

You need to be able to view pdf files to see this, however. so make sure adobe reader is installed.

Brace yourself - it's worse than that. In 2005 that $2000 is a DEDUCTION, not a credit. If you're in the 25% marginal tax bracket, that's a $500 tax savings. 2006 is a CREDIT, so a tax savings of $3150.

Mike

caveat emptor, due diligence. Pick either catchphrase.

how does that work? they kept telling me i'd get 2 grand back from buying the car. where does it get narrowod down to 500?

Example:

I make $1,000 and the tax rate is 10%. Ahhh, trickle-down, you gotta love it!

If I have a $100 DEDUCTION, then that comes off the $1,000 for a total of $900 TAXABLE. At 10% the tax is $90.

If I have a $100 TAX CREDIT, then that comes off the bottom line of the taxes. So, $1,000 X 10% = $100 less the $100 tax credit = I PAY $0 IN TAXES.

That being said, me and the missus bought 2 hybrids in '05, so we do feel your pain.

Don

They were mistaking a deduction for a credit.

Basicly, a deduction gets subtracted from your taxable income. While a credit gets deducted from what ever taxes you ended up having to pay.

$500 is the amount of money you can expect to save on your taxes if $2000 got Deducted from your taxable income in the 25% tax bracket. Think if it this way 2000*.25= 500

Confusing? Yes. Thats why dealers probably got it messed up too. Also, when I bought my 03' the H&R tax examainer had no idea about the deductable. So it's basicly up to you to find out the info. At first the H&R person put it down as a credit. I found out it was wrong and had to ammend my taxes

My hydroponics experiment

You ever notice how hard it is to lip read cartoon characters?
"Crazy is what the sane call Delta Flyer"

On top of that, car salesmen aren't restricted by facts -- they'll say ANYTHING.

Don

I do believe however that individual states do offer CREDITS on state income tax forms for 2004/5/6 hybrid purchase. Colorado does.

Bill G in Colorado

Good point

My hydroponics experiment

You ever notice how hard it is to lip read cartoon characters?
"Crazy is what the sane call Delta Flyer"

Not so sad here. Opportunity is knocking!

I'm in the process of upgrading from an '05 to an '06. I'll take my $2000 deduction for '05, and the $3150 (or so) off the bottom line of tax owed from '06, plus a state "sales tax" exemption (legislature still working on it) of up to $1000.

The sticking point will be trade-in value. But, hey it's fun to negotiate. There are 3 very competitive dealers within 30 minutes (max) of my location. Sure like the Barcelona Red and the rearview camera.

Denny

ZinFan