Re: Anyone know the 2006 HCH Tax Credit?
 

it came from http://www.hybridcars.com/tax-deductions-credits.html

However I also read this some place else in the last couple of days... Still digging !

Re: Anyone know the 2006 HCH Tax Credit?
 

It means your liability can't go below zero. which makes sense. NOT your refund.

A refund would be the difference between your withholdings for the year and your tax liability.
Since we can change the withholdings by the number of exemptions on form W-4, the size of a refund if any is up to the taxpayer.

Refunds are bad - it's your money! they kept it for a year, you shouldn't celebrate when they give a portion back (without interest).

Re: Anyone know the 2006 HCH Tax Credit?
 

Exactly ! I typically get a sizeable refund, due to charitible giving, etc, so if I do nothing diffrent this year, I will not get any of the "hybrid" credit. What I have requested from my employer is they reduce my withholding, so that (in a perfect world) I would owe say $2100, which would be the estimated credit I get for buying my 06 HCH and then I owe nothing and get a zero refund ! Tricky part is withhold enough so that the Fed's do not penilize me, but leave enough so I can take advantage of the credit.

My gosh..all I am trying to due is reduce dependance on forign oil and help the environment by buying a hybrid... I wish it was that easy !

Re: Anyone know the 2006 HCH Tax Credit?
 

I think there is some confusion here. Even if you get a refund, that does NOT mean that your "tax liability" (which can be reduced by the credit) is zero! You might owe $10,000 in taxes for the year, but have $15,000 withheld over the course of the year - so you'd get a refund of the extra $5,000. You could still take the credit to reduce your tax liability - the $10,000 you are actually paying, that is, what the government is keeping out of the $15,000 withheld over the year. So your refund would increase by the amount of the credit.

The people it will NOT help are those whose deductions and other credits are so much that they end up having EVERYTHING that was withheld returned to them (or perhaps they had nothing withheld, because they knew they would owe nothing in taxes), because they actually owe NO taxes at all for the year. These are people who earn very little, or have LOTS of deductions or other credits.

Example (these numbers are TOTALLY hypothetical): I earn $80,000, am in a 20% bracket, have deductions of $10,000, and have another credit worth $1000. To figure my tax, I subtract my deductions (whether itemized or standard) from the $80,000 (for this, we'll say the 80K is my Adjusted Gross Income, bottom of page 1 of the 1040, and we'll ignore exemptions), leaving $70,000. My preliminary tax due is $14,000 (20% of 70,000). From this, I subtract all other credits (here $1,000), so I owe $13,000. If I had $14,000 withheld, I'd get a refund of $1,000; if I had $12,000 withheld, I'd owe $1,000, to be sent with my return. But either way my tax liability is $13,000. So I could use the hybrid credit to reduce that, increasing my refund or decreasing the amount I have to pony up on 4/15/07.

The only way I can't use the full hybrid credit is if the tax liability ($13,000 in the example) is 0, or less than the amount of the credit (in which case my tax liability would be reduced to 0 by using part of the credit, but would not go below 0).

I hope this clarifies things.

BTW, I suggested in another forum (I don't know why useful general stuff like this is always getting buried in the individual car forums!) that anyone getting a sizeable credit (like I will be, for the Prius I'm picking up tomorrow), might consider adjusting their withholding, so they get more money in their paychecks during the year, since their total tax liability will be lowered by the amount of the credit. That is, if they will HAVE liability!

Re: Anyone know the 2006 HCH Tax Credit?
 

*edit: Cynthia is correct, she beat me to the punch.

The credit isn't going to ever negatively impact any refunds. The reason that wording might be present is that if a persons liability is really low, the federal government isn't going to come out OWING the taxpayer because of this credit.
Imagine the following:

Withholdings $2200
Tax liability: $2000
child tax credit: $1000
hybrid car tax credit: $1500

so if we subtract the credits (child credit first) from your liability you get -500. This is where the value of the credit would get shorted by 500, because your liability wouldn't go negative - it would b 0. but the IRS would still refund the $2200 withheld. so it's not like you're getting robbed - you've just won the American national pastime of not paying a thin dime in income tax.

kbb

Re: Anyone know the 2006 HCH Tax Credit?
 

BTW I set my state and federal witholdings to 10 at the beginning of the year.
Then I change them to zero about April or May.

At the end of the year they have withheld about the right amount but I got the use of my money early in the year.

As long as they withhold enough so the check you write next April 15th isn't too large ($1500 I think) they don't care if the money was withheld in even amounts or uneven amounts.
I even heard about a guy who leaves it at 10 till October then tells his employer to withhold 100% of his check for the rest of the year.
I'm not THAT good at financial planning.

Re: Anyone know the 2006 HCH Tax Credit?
 

You could owe a penalty if your tax due at the end of the year is over $1000.

Re: Anyone know the 2006 HCH Tax Credit?
 

That is why I should be careful to not owe over that amount.

Still getting a refund is dumb; the IRS does not pay interest.

Re: Anyone know the 2006 HCH Tax Credit?
 

Kenny! Careful with that gaming of the withholding exemptions! It is illegal.

I'm self employed so I pay quarterly estimated tax. It is SO complicated that my accountant says even the IRS can't accurately compute it, so I just pay 1/4 of my last year's tax every quarter so I stay out of trouble (what's called safe harbor). This hurts when I don't have a contract and am making nothing, but I still pay the quarterly tax.

The only reason you are getting away with this is that the IRS auditing department is completely overwhelmed. Don't take chances. Follow the directions on the witholding form to the best of your ability. Someday you might get audited and I'd hate to see another good person who is smart enough to help America by buying a hybrid car have tax troubles.

And ENJOY the perfectly legal tax credit you get for buying a hybrid in 2006!

Re: Anyone know the 2006 HCH Tax Credit?
 

Your conclusion is absolutely wrong. The amount of taxes you had withheld, and the amount of refund or taxes owed when you file your return, have nothing to do with your eligibility for the credit.


I'll make up some numbers to give you an example. Let's say you make $80,000 in 2006 and you have $20,000 withheld from your paychecks. When you file your return it turns out that you should have paid only $18,000, so you get a refund of $2,000. Now, if you bought an HCH in 2006 and the IRS ruled that the tax credit for the HCH is $2,100, then instead of getting a $2,000 refund you'll get a $4,100 refund.


Continuing this example, if you had $18,000 withheld during the year you'll get a $2,100 refund due to the HCH credit. If you had $15,900 withheld during the year, then you would have had to pay an additional $2,100 at tax time, but the HCH credit eliminates your tax bill and you owe nothing. In every one of these cases, whether you have a refund coming, or nothing coming, or you owe taxes, you're better off by $2,100 with the tax credit for the HCH.


Let's look at another example concerning the other credits. Let's say you had just $5,000 withheld from wages of $40,000. You do your return and you find out that after a child care credit and retirement savings credit you owe only $1500. So you get a $3,500 refund. But wait, you also bought that HCH. In this case you can't get the full $2,100 credit for the HCH because if you did you'd get all of the $5,000 withheld as a tax refund, plus another $600 that you never paid the IRS. The IRS is saying, wait a minute, if you only had $5,000 withheld from your paycheck there's no way we're giving you a refund of more than $5,000. Your final tax bill can't be less than zero.


By the way, that thing about which credit is counted first really doesn't matter much. Most credits are not "refundable", which means that the IRS will not pay you back money you never paid. And the order in which you count non-refundable credits doesn't matter. The result is always the same - you don't get back more than you paid. I know that the EIC (Earned Income Credit) IS refundable. So people who earn it (very low income people) can end up paying a negative income tax - the IRS pays them instead of them paying the IRS, i.e. their refund is larger than what they had withheld. For such people the hybrid tax credit could be useless. But how many people who make $10,000 a year are buying hybrids anyway?