Because the 2006 AMT exemption drops $13,000 from 2005 (for married filing joint) my estimated AMT is within $200 of regular tax which means that I will only realize $200 of the tax credit on my hybrid purchase.

I would urge all 2006 hybrid purchasers to run the calculation - the drop in the exemption is estimated to cause 15 million additional taxpayers to pay some amount of AMT in 2006. There are web based calculators that you may use to estimate your 2006 regular and AMT taxes. If the difference between the two amounts is less than the expected hybrid tax credit, you will only realize the credit for the amount the regular tax exceeds the AMT.

Congress has discussed the AMT issue but taken no action to date. Given the current focus on providing incentives for energy conservation, having the hybrid credit not offset AMT while simultaneously reducing the AMT exemption effectively negates the incentive for many unsuspecting taxpayers.

Thanks for the heads-up. I did a quick estimate of my tax liability for 2006 and discovered that, sure enough, I am going to be hit with the AMT next year if the AMT deduction is reduced as currently scheduled. As a result, I won't see any of the hybrid tax credit that I thought I would get on my '06 HAH.

OTOH, not getting the credit would not have affected my decision to buy the car, which I absolutely love as it is far more safe, comfortable and economical than the '96 Mercury Sable I was driving. I also got the car for nearly $4K off MSRP so it was a very good deal as well.

OK, I admit I'm being lazy, but could someone briefly summarize for me what triggers the AMT? I thought it was things like passive income and tax shelters, so I've never worried about it. Is it the total amount of itemized deductions that is relevant? or what?

Please complete the following: "You should consider whether you might have to pay the AMT if __________________________".

I'll look it up on TurboTax tonight, but if someone has a good brief answer (hahaha - from the tax code!!!!), that'd be great for a lazy person like me (and all the other lazy souls out there who are now wondering, geez, will *I* have to pay the AMT because I bought a hybrid?).

I will get hit with AMT next year even though I will only take the standard deduction (i.e. I don't itemise) under the "regular" tax calculation. The Turbotax website has a 2006 estimated tax calculator that takes into account AMT although it doesn't explicitly tell you that you will have to pay AMT. Basically, if you are married and file jointly with an income over $100,000 it's almost certain that you will be paying AMT.

If you have more than $45,000(Married, Joint) in taxable income and have high state income taxes and several exemptions, AMT will likely be higher than your regular tax. This is because the AMT calculation adds back any deduction for state income taxes and does not allow personal exemptions.

Just because you have had a tax liability in the past doesn't mean the 2006 exemption drop won't cause AMT to kick in. If it does, you get ZERO hybrid tax credit.

My situation: TCH arrives on 6/15. I'm putting 50% down and taking a loan out myself. I am a vet on disability and I pay almost zero taxes each year. My significant other (date set for her to move in is July 1) only gets a head of household deduction. How do we maximize our tax credits? If I put the car in my name, I'll get zero back. If I buy the car can I put it in her name for 90 days and the transfer it back to myself and pay her a $1 buyout? I don't want to get married for a tax credit.....

Congress passed something to take care of the AMT and Bush will sign it (if he hasn't already). Don't have the details off the top of my head...

Infael

2004 Gray Prius with smart start/entry and VSC

Gosh, I wish I qualified to pay the AMT.

Need fewer troops to support.
Drive a hybrid.
Best tank 71.65 MPG.

Before this car I spent two years learning hypermiling on my 2004 HCH1.

No, you don't. It's an alternative MINIMUM tax. If you qualified for it, that means that your computed tax burden is lower than the AMT and you would pay the higher of the two.

Presideny Bush was expected to sign a bill Wednesday afternoon to provide greater AMT relief.
The bill will increase for tax year 2006 the AMT income exemption levels that were in effect for 2005. The new exemption levels will be $42,500 for single filers, up from $40,450, and $62,550 for joint filers, up from $58,000.

In addition, when calculating whether they're subject to AMT, taxpayers will be allowed to use all nonrefundable personal credits to offset AMT liability. Normally, these credits often end up being disallowed under AMT.

The JCT estimates that the provision agreed to by lawmakers will prevent an additional 15 million taxpayers from falling prey to the AMT in 2006.

Tax Policy Center estimates show the majority would come from households with income between $100,000 and $500,000, and their savings would range from $1,074 to $2,838.

The estimated cost of the provision over 10 years is $33.9 billion.

The AMT imposes a higher bill on taxpayers than the regular tax code.

The tax, originally intended for the wealthy, now threatens to catch tens of millions of middle-class taxpayers unless lawmakers continue to increase the AMT income exemption levels, since the original levels were never adjusted for inflation.


(Dan's editorial note. I love the fact that they will be taking a little less of YOUR money and refer to it as a "cost of the provision" like they are giving you something.)