Tax Credit My Shiiny Metal ***! - GreenHybrid

snax · #1 (**permalink**) 02-01-2007, 12:01 PM

Beware future hybrid buyers. This supposed federal tax credit is not as rosy as they mislead so many of us to believe!

If you have children and sufficient mortgage interest deductions, it is possible that you may NOT receive ANY tax credit for the purchase of the vehicle! Specifically this issue affects people who do not owe federal tax.

In our case, we are eligible to receive a refund in excess of the tax we paid due to additional child tax credits, as such, the hybrid credit is simply eliminated from the calculation.

Now while we have little room to complain about our actual federal tax obligation, we still feel robbed out of $1450 for the Escape Hybrid we purchased last year. Granted, it's money we never paid into the system, but it's a credit we counted on getting applied before our additional child tax credit would apply, reducing our potential refund by the $1450 tax that remained before the additional child tax credit was applied.

While we are still eligible for a state credit of $1500 that can be rolled over through 5 tax years, knowing this beforehand would have affected our decision to buy the hybrid that we did. It would have shifted our consideration toward a used vehicle to reduce depreciation since we have many other ways to take advantage of the state credit.

We feel ripped off.

I know that it was probably published somewhere in the credit publication how this would apply, but obviously it was obscure.

Essentially this robbing us of our credit means that the average middle class family with 2+ kids and a mortgage will never be eligible to receive the credit! Chalk another one up to Bush's war on the middle class!

worthywads · #2 (**permalink**) 02-01-2007, 04:14 PM

Quote:

Originally Posted by snax

Beware future hybrid buyers. This supposed federal tax credit is not as rosy as they mislead so many of us to believe!

If you have children and sufficient mortgage interest deductions, it is possible that you may NOT receive ANY tax credit for the purchase of the vehicle! Specifically this issue affects people who do not owe federal tax.

In our case, we are eligible to receive a refund in excess of the tax we paid due to additional child tax credits, as such, the hybrid credit is simply eliminated from the calculation.

Now while we have little room to complain about our actual federal tax obligation, we still feel robbed out of $1450 for the Escape Hybrid we purchased last year. Granted, it's money we never paid into the system, but it's a credit we counted on getting applied before our additional child tax credit would apply, reducing our potential refund by the $1450 tax that remained before the additional child tax credit was applied.

While we are still eligible for a state credit of $1500 that can be rolled over through 5 tax years, knowing this beforehand would have affected our decision to buy the hybrid that we did. It would have shifted our consideration toward a used vehicle to reduce depreciation since we have many other ways to take advantage of the state credit.

We feel ripped off.

I know that it was probably published somewhere in the credit publication how this would apply, but obviously it was obscure.

Essentially this robbing us of our credit means that the average middle class family with 2+ kids and a mortgage will never be eligible to receive the credit! Chalk another one up to Bush's war on the middle class!

Yes it is Bush's tax cuts that put you below the Alternative Minimum Tax, or the AMT itself started by the Democrats, take your pick.

Would you rather get less credit for your kids, but get the Hybrid rebate? I think you're better off getting more for your kids, as are parents that didn't buy a hybrid.

snax · #3 (**permalink**) 02-01-2007, 05:29 PM

You have missed the point. This tax CREDIT as it has been presented by the IRS and everywhere else has strings attached that were not published by the IRS until the tax year was over!

This is a bait and switch, plain and simple. We were deceived into purchasing something that in retrospect would not have made sense had full disclosure been made.

It is irrelevant as to whether we are getting $2400 back, or paying $2400 in. It's $1950 in CREDIT that the IRS proclaimed we would be eligible for and, now well after fact and our cost has been incurred, they have pulled the rug out from under people who would benefit most from this credit.

This whole "You should be happy for what you do get" is classic republican trash. (Edit: Sorry, after re-reading your post, I'm not so sure if that's where you were going.) While we don't owe federal taxes directly, we certain DO pay taxes and are as entitled to the IRS promise of a tax credit as anybody else.

worthywads · #4 (**permalink**) 02-01-2007, 07:00 PM

Quote:

Originally Posted by snax

You have missed the point. This tax CREDIT as it has been presented by the IRS and everywhere else has strings attached that were not published by the IRS until the tax year was over!

This is a bait and switch, plain and simple. We were deceived into purchasing something that in retrospect would not have made sense had full disclosure been made.

It is irrelevant as to whether we are getting $2400 back, or paying $2400 in. It's $1950 in CREDIT that the IRS proclaimed we would be eligible for and, now well after fact and our cost has been incurred, they have pulled the rug out from under people who would benefit most from this credit.

This whole "You should be happy for what you do get" is classic republican trash. (Edit: Sorry, after re-reading your post, I'm not so sure if that's where you were going.) While we don't owe federal taxes directly, we certain DO pay taxes and are as entitled to the IRS promise of a tax credit as anybody else.

Your correct in not assuming I was a republican, I'm libertarian. I'm not saying be happy ever concerning taxation. I am for lower taxes (and lower corresponding spending). I'd like to see tax deductions for my car loan too, and no minimum tax.

If you don't want to disclose any more that's fine, but I'm curious exactly how your tax situation pans out, your description isn't clear to me. Are you hit by the Alternative Minimum Tax?, you say you don't owe federal taxes directly, how is that? How would you get credit if you don't pay tax?

snax · #5 (**permalink**) 02-01-2007, 08:33 PM

Ok, here's the rundown:

Income: $53,837k
Dependents: 4 including spouse (5 exemptions total) $16500
Mortgage interest deduction: $19727
Child Tax Credit: $3000
Charitable Contributions: $1500
Telephone Tax Refund: $60
No AMT or other income or deductions.

This drops our taxable income to $14,297 before the credits are applied.

worthywads · #6 (**permalink**) 02-01-2007, 10:16 PM

Quote:

Originally Posted by snax

Ok, here's the rundown:

Income: $53,837k
Dependents: 4 including spouse (5 exemptions total) $16500
Mortgage interest deduction: $19727
Child Tax Credit: $3000
Charitable Contributions: $1500
Telephone Tax Refund: $60
No AMT or other income or deductions.

This drops our taxable income to $14,297 before the credits are applied.

So if I'm following at $14297 your tax is 10% of that or $1429.70?

What next? What credits do you get to get to zero? What was your AMT?

wvujeb · #7 (**permalink**) 02-02-2007, 05:47 AM

AS for as it not being published until after the tax year, I claim BS. I have ready for at least the last 4 months that you may get hit by AMT, and for longer than that I have heard that you can only claim the credit agains tax you owe. You can't use the credit to get a refund or more than you paid.

shoebox303 · #8 (**permalink**) 02-02-2007, 06:22 AM

I agree that it was well publicized that you cannot claim the credit for more taxes than you owe. The AMT issue, however, was not well publicized.

wvujeb · #9 (**permalink**) 02-02-2007, 08:04 AM

Heres an article on MSN referring to the AMT before the credit even went into effect:
http://moneycentral.msn.com/content/...44.asp?Printer

Here's an article on Forbes from March of 2006:
http://www.forbes.com/manufacturing/...15beltway.html

Here's an article from USA Today from August, 2005
http://www.usatoday.com/money/perfi/...1-breaks_x.htm

Here's a link to an article on evworld that references an article in the NY Post from Jan, 2006:
http://www.evworld.com/view.cfm?page=news&newsid=10728

It was not something new.

snax · #10 (**permalink**) 02-02-2007, 08:10 AM

Here's what you are missing:

While it was possible to discern that the hybrid tax credit itself cannot exceed the amount of taxes paid, what was not disclosed was the order in which the credit would be applied.

In other words, they put it at the bottom of the list. Had they published this beforehand, then we would have known that it would be applied after our additional child tax credit - which we were aware would put us past the zero point of taxes owed. If, as we had assumed and had little reason to doubt, the hybrid tax credit were applied before the additional child tax credit, then our refund (or payout if you prefer) could at least have been maximized to the full $3000 ($1000 per our 3 children).

The bottom line is that this information was not published on the IRS site with respect to the order it would be applied. It seemed that the only people who were ironically truly honest about this so called credit were the people who sold us the car! All they would offer up is that they knew there were credits available, end of story.

What is truly wrong with our tax system is the number of if, ands, or buts, and the number of loopholes that a person needs to be a tax expert to fully take advantage of well before ever going to a CPA to file a 1040. It's ridiculous that the only people who can be fully informed must do so much research of the actual tax code or enlist the paid services of a CPA beforehand. Most of us don't have that luxury of time or money.

Frankly, I AM happy to be getting as much of a refund as we are, however this slight of hand with tax credits is a slap in the face to middle class people who would otherwise actually receive the credit IF THEY MADE MORE MONEY!