Toyota will pass the limit on Oct 1 and thereafter the credit for a hybrid Toyota will decrease. Another question on the Tax Credit...is it limited in any way by what you agi is? In other words does it phase out as the hybrid buyer's income level increases??

 

For the lower limit of income, it is now a tax credit. So, you have to, otherwise, have to pay at least that much in tax.

For the upper limit, the only restriction I know of, is that you can not be subject to the Alternative Minimum Tax.

 

The AMT is the only thing that can hinder the tax credit (except for having to pay less tax than what the credit is worth). This has been a major complaint by many. Most people assume that most of the people purchasing hybrids are going to live in the suburbs of major cities. Thus, they will be paying high property taxes and claiming large deductions for mortgage interest. So, many say that most of the people purchasing hybrids will not even be able to claim the credit.

Personally, I think this is a lot of BS, but we will have to wait and see how much the AMT is really going to affect people. It is beginning to claim more and more people and has fallen under a lot of scrutiny lately.

 

What drives the AMT is more the level of state taxes in your state. A disproportionate number of people in California and New York pay AMT. It has been called the blue state tax because of the fact that coastal states tend to be the blue states and are also the ones with high state taxes and high cost of living. If you are middle class with childeren and both spouses work in California then you most likely pay AMT. The same demographic that is most likely to buy a hybrid is also most likely to pay AMT. Here in San Francisco nearly all of my friends and co-workers with families pay AMT. On the plus side it does make your tax picture very simple. There is simply no point in trying to claim people as dependents etc when you dont qualify anyway.

There is no way that anything is ever going to happen to AMT - the government make too much money from it.