Howdy,

My beloved Geo Prizm has gone to the caryard in the sky, which means I'm going for a 2006 Civic Hybrid. There's a dealer here that has one coming in in the next few weeks. I'm willing to wait until January 1st to pick it up to take advantage of the tax credit.

Having said that I'm having a difficult time finding anything official that says that if I purchase a hybrid say tomorrow, and I pick it up after January 1st, that I'd qualify for the tax credit. Does the transaction officially take place on the day I drive it off the lot or when I sign the paperwork? Where can I find something that confirms that the transaction is based on the day of drive-off? I've read about folks who are doing this, but I'm hesitant to gamble with that sum of cash based on hearsay.

Your help would be greatly appreciated,

Jeff

 

Isn't the only difference in the tax credit from 05 to 06 only $100?

 

The law says that the vehicle must be "put in service" after January 1st 2006. That may be open to interpretation, but most people would say it means when you drove it off the lot.

The way I see it (and I'm no tax attorney) the only documentation the IRS can see and trust is the vehicle registration date. If your dealer registers it in your name with the DMV after Jan. 1 I think you'll be okay with the credit.

I asked one dealer about giving a large deposit, or even paying in full for the car when it arrives, and having them hold it for me until January. He said they would not do it. They must report the sale to Honda and perform the registration at the same time. If they delay reporting the sale to Honda it means they will suffer on their next allocation of vehicles. It may also have a negative impact on the dealer himself when he gets his year-end bonus.

 

As far as the credit being $100 different between 05 and 06: 05 was a tax deduction not a credit so I imagine its a greater difference than $100 that you would save on your taxes.

 

The credit is $2100 (est.) and the deduction is $2000. However to compare apples-to-apples, it's like a $2100 credit in 2006 compared to a $500 credit for my tax bracket. So I'm looking at an effective $1600 savings.

 

Yep. The top tax bracket is 35% (if you make more than $326,450 a year). At that rate the $2000 deduction is worth $700. Most people are probably in the 25% bracket, so for them the deduction is worth $500. The $2100 tax credit for 2006, assuming that's the final number, is worth $2100.

 

I purchased my HiHy remotely, sending paperwork and funds via overnight express and flew out a couple of weeks later to pick it up. The "sale date" was the date the signed paperwork was received by my dealer. They issued temporary tags from the state they are located in as of that date. I had to pay taxes in my state based on that date.

I personally doubt that the IRS will accept the argument that you didn't pick up your vehicle until 2006 - in their view, you owned it as of the date on the paperwork and it was your choice to use it or not, it was available to you as of the sales date.

 

So Im not a tax person here and I am confused. From what I get from reading the posts here is that for 2006 is a tax credit and not a tax deduction as in past years?

 

Right.

 

I would not do or sign anything till Jan 1.


The initial frenzy may have cooled a bit and you may get a better deal too.