Tax Credit for 05 FEH
#1
08-21-2006, 05:53 PM
Tax Credit for 05 FEH
After sending several letters to FORD motor company about the tax credit for 2005 models bought in 2006, I received a response from them today. It is as follows:
"I am pleased to inform you that Ford Motor company is currently in the process of requesting IRS certification for the 2005 Escapy Hybrid. While certification will not be official until the IRS provides the required acknowledgement, we have every reason to believe that the 2005 model will qualify for the tax credit. Our epectation is that 2005 Escape Hybrids purchased after January 1st, 2006 will qualify for the same amount of tax credit as the 2006 and 2007 models ($1950 for 4 wheel drive: $2600 for 2 wheel drive).
We anticipate that the IRS will acknowledge certification of the 2005 model within approximately two months."
He gave his name and direct phone number if I had any questions regarding the tax credit.
Has anyone else written a letter to Ford asking for the credit?
If this accually happens I would have gotten the deal of the century on this vehicle. The dealership took 2600 off of the car because they also called the IRS and they stated that the 2005 did not get the tax credit. Any input from any of you would be greatly appreciated!
"I am pleased to inform you that Ford Motor company is currently in the process of requesting IRS certification for the 2005 Escapy Hybrid. While certification will not be official until the IRS provides the required acknowledgement, we have every reason to believe that the 2005 model will qualify for the tax credit. Our epectation is that 2005 Escape Hybrids purchased after January 1st, 2006 will qualify for the same amount of tax credit as the 2006 and 2007 models ($1950 for 4 wheel drive: $2600 for 2 wheel drive).
We anticipate that the IRS will acknowledge certification of the 2005 model within approximately two months."
He gave his name and direct phone number if I had any questions regarding the tax credit.
Has anyone else written a letter to Ford asking for the credit?
If this accually happens I would have gotten the deal of the century on this vehicle. The dealership took 2600 off of the car because they also called the IRS and they stated that the 2005 did not get the tax credit. Any input from any of you would be greatly appreciated!
#2
08-21-2006, 06:09 PM
Re: Tax Credit for 05 FEH
Congratulations! It sounds as though you have pulled off a real coup. I think that all the IRS requires is that the vehicle is certified by the manufacturer. Keep checking the IRS site for updates. You'll have until April 15th of next year (or October, if you file for an extension) to get Ford to certify the 2005 FEH for the credit.
I wouldn't brag about it to the dealer, if I were you.
I wouldn't brag about it to the dealer, if I were you.
#6
08-21-2006, 08:30 PM
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Join Date: Mar 2005
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Re: Tax Credit for 05 FEH
Yes! Whooo Hoooo! Na Na na naa naaa! I knew it!
You all gotta have faith in the "system". While I bought mine in '05 and already got my benefits ( $3200 cash back in Colorado, and $400 from IRS ) I just knew people who bought older dealer stock would still qualify if they are the first owner. It did not make sense that the IRS would penalize these owners.
So this is for all the nay-sayers:
-J
You all gotta have faith in the "system". While I bought mine in '05 and already got my benefits ( $3200 cash back in Colorado, and $400 from IRS ) I just knew people who bought older dealer stock would still qualify if they are the first owner. It did not make sense that the IRS would penalize these owners.
So this is for all the nay-sayers:
-J
#7
08-22-2006, 04:06 AM
Re: Tax Credit for 05 FEH
Originally Posted by bunny
The dealership took 2600 off of the car because they also called the IRS and they stated that the 2005 did not get the tax credit. Any input from any of you would be greatly appreciated!
"The deduction will be limited to $500 for vehicles placed in service in 2006 and no deduction will be allowed after that year."
Note, this is for the older "deduction", and not the newer "credit" that applies to 2006 and 2007 models.
Some how, when it comes to Federal income taxes, I think the IRS's opinion trumps Ford.
#8
08-22-2006, 04:42 AM
Re: Tax Credit for 05 FEH
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.
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.
#9
08-22-2006, 05:22 AM
Re: Tax Credit for 05 FEH
Originally Posted by oscars2212
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.
As long as they formally acknowledge the applicability of the new tax credit before your 2006 return is due, you are set.
While things could, of course, change. Right now, I would give more weight to the IRS, than on Ford, for tax issues.
#10
08-22-2006, 05:35 AM
Re: Tax Credit for 05 FEH
"Would not, then, the IRS update the guidance on their website? And, would not the guidance need to come from the IRS and not Ford?"
Yes, which is why I said "once the IRS certifies..."
Until then, people are still SOL with respect to the tax credit if they bought a 2005 FEH in 2006. But this IRS certification appears to be a rubber-stamp, meaning once the manufacturer sends in the proper paperwork the IRS will issue its certification. And apparently Ford has sent in that paperwork finally for the 2005 model yr.
Plus, I believe all Ford has said is that they sent in the necessary paperwork, and expect the IRS to issue a notice certifying the 2005 FEH for the tax credit in 2 months' time. They haven't told anyone that the 2005 FEH currently qualifies for the tax credit.
"While certification will not be official until the IRS provides the required acknowledgement, we have every reason to believe that the 2005 model will qualify for the tax credit"
Yes, which is why I said "once the IRS certifies..."
Until then, people are still SOL with respect to the tax credit if they bought a 2005 FEH in 2006. But this IRS certification appears to be a rubber-stamp, meaning once the manufacturer sends in the proper paperwork the IRS will issue its certification. And apparently Ford has sent in that paperwork finally for the 2005 model yr.
Plus, I believe all Ford has said is that they sent in the necessary paperwork, and expect the IRS to issue a notice certifying the 2005 FEH for the tax credit in 2 months' time. They haven't told anyone that the 2005 FEH currently qualifies for the tax credit.
"While certification will not be official until the IRS provides the required acknowledgement, we have every reason to believe that the 2005 model will qualify for the tax credit"
