According to Edward F. McQuarrie, a professor at Santa Clara University's Leavey School of Business, chances are most of the people who bought a hybrid car in the past year will not receive the full credit.
I'm not about to claim I fully understand why or how come (go talk to a professional or buy the tax software!), but here are his major points:
- Consumers who bought their hybrid from Toyota on or after October 1st are eligible for only half of the tax credit.
- Unless your regular tax obligation exceeds your Alternative Minimum Tax (AMT) by the amount you can claim for the credit (i.e. $3,150 for the Prius if you bought it before October 1st), you won't get the full tax credit.
- If you paid the AMT last time you filed, you aren't eligible for the tax credit.
- Families who earn between $150,000 and $500,000 will most likely not qualify for the full tax credit
- The larger the family, the less likely you are to qualify for the full tax credit
- Single taxpayers will likely qualify
- If you earn more than $750,000 a year, you will qualify.
- If you use Turbo Tax, open Form 6251 to see a side-by-side comparison (lines 33-34) of your regular tax liability and your AMT liability. This gap shows you your limit on your hybrid tax credit.
If you do qualify for the hybrid car tax credit, here are the forms you need to fill out. Also, some states have their own hybrid tax benefits, so make sure to look around for those, too.
Other things you should know:
You can't claim the hybrid car tax credit until February 3rd (Source: GreenHybrid). If you use Turbo Tax, the form (8910) won't be available until February 16th. So you either wait or you file an ammended return.
The hybrid car tax credit (alternative fuel credit) is last in a long line of other tax credits (source: About.com):
- Child and dependent care tax credit
- Credit for the elderly and disabled
- Adoption tax credit
- Child tax credit,
- Mortgage credit,
- Hope and Lifetime Learning tax credits,
- Credit for retirement savings,
- Foreign tax credit,
- Nonconventional fuel credit, and
- Electric vehicle credit.
A few last requirements from the IRS:
Even though a manufacturer has certified a vehicle, a taxpayer must meet the following requirements to qualify for the credit:
- The vehicle must be placed in service after 12-31-05 and purchased on or before 12-31-10.
- The original use of the vehicle must begin with the taxpayer claiming the credit.
a. The credit may only be claimed by the original owner of a new, qualifying, hybrid vehicle and does not apply to a used hybrid vehicle.
- The vehicle must be acquired for use or lease by the taxpayer claiming the credit.
a. The credit is only available to the original purchaser of a qualifying hybrid vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.
b. For qualifying vehicles used by a tax-exempt entity, the person who sold the qualifying vehicle to the person or entity using the vehicle is eligible to claim the credit, but only if the seller clearly discloses in a document to the tax-exempt entity the amount of credit.
- The vehicle must be used predominantly within the United States.
Looking for more? Check out this post on the 2007 federal tax credit for hybrid cars.