Hi! My first post.

I am thinking of buying a hybrid (probably HCH). I know there is a ~$2,100 tax credit for purchasing one this year. However, I am most likely going to sell that car in about 15 months from now, when I go back to school. What will happen to the credit? Would I have to pay anything back?..

Thanks!

 

I am not sure about the credit but they say that you need to return some of the deduction (earlier years) if the car will not be used for the same purpose any longer (paraphrased). There are posts about this (the deduction) but you can always check irs.gov and see what they have to say.

I just traded in my '04 and there really is no where that I could find clear info. The IRS people, my accountant and the dealer all did not know.

Good luck.

 

I don't know for sure, but my best guess is that you get to keep the credit.

 

Pardon me for asking, but have you paid enough tax in the present year to be given a credit? It was your remark about going back to school which made me wonder?

 

By the year end I will have paid much more than $2,100 in federal income tax. I am planning to go back to school to get a professional degree (not my first one).

 

I believe I read that if you do not keep the car for at least threee years you have to pay the credit back. I believe that it may be pro-rated say you kept it for two years you would only have to pay 1/3 of the deduction back. I believe that its on www.irs.gov

 

I have not found anything on IRS.GOV on this topic. I have read before that the IRS was going to "provide guidance" on this but don't know if they ever did or not. My other question would be, how does IRS know if smb sells their hybrid? What is the mechanism here?

If anyone can provide a link to a specific IRS document, it would be much appreciated!

 

I don't think the IRS will have too much info on this yet, as they have yet to announce the official figure for the Honda Hybrid tax credits. The $2100 figure is everyone's estimates (the IRS has announced figures for Toyota and Ford and the figures met estimates). Try the DoE/EPA website fueleconomy.gov for info on this subject including

"IRS has yet to provide guidance on several rules

• Rules under which lessors may claim credits
  
• The rule preventing the credits from being used to reduce alternative minimum tax liability
  
• Rules relating to recapture of credit (e.g., if the vehicle is re-sold)"
  

from http://www.fueleconomy.gov/feg/tax_hybrid_new.shtml.

So, it looks like the waiting game continues...

 

This is the info from the IRS web-site regarding the deduction (not the credit), I can find no info on the credit as of yet...

Clean-Fuel Vehicle Property





You must recapture the deduction for clean-fuel vehicle property if the property ceases to qualify within 3 years after the date you placed it in service. The property will cease to qualify if it is changed in any of the following ways.

1. It is modified so that it can no longer be propelled by a clean-burning fuel.
   
2. It ceases to be a qualified clean-fuel vehicle property (for example, by failing to meet emissions standards).
   
3. It becomes nonqualifying property, defined earlier.
   

Sales or other dispositions. If you sell or otherwise dispose of the vehicle within 3 years after the date you placed it in service and know or have reason to know that it will be changed in any of the ways described above, you are subject to the recapture rules. In other dispositions (including a disposition by reason of an accident or other casualty), the recapture rules do not apply.

If the vehicle was subject to depreciation, the deduction (minus any recapture) is considered depreciation when figuring the part of any gain from the disposition that is ordinary income. See Publication 544 for more information on dispositions of depreciable property.


Recapture amount. Figure your recapture amount by multiplying the deduction by the following percentage.

• 100% if the recapture date is within the first full year after the date the vehicle was placed in service.
  
• 66⅔% if the recapture date is within the second full year after the date the vehicle was placed in service.
  
• 33⅓% if the recapture date is within the third full year after the date the vehicle was placed in service.
  

 

The credit is still under consideration by the IRS but you can assume there will be some recapture period similar to the deduction. Sorry.