2006 Hybrid Tax Credit is NONREFUNDABLE
Thread Starter
|
Ridiculously Active Enthusiast
Joined: Jul 2004
Posts: 1,430
From: Phoenix, AZ
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
Some people seem to be jumping on my case about this and some are on the verge of being semi-insulting. That's fine, I've got thick skin.
But all I'm saying is this:
There is nowhere, ANYWHERE, on the irs.gov site or anywhere else, which says "the hybrid tax credit will increase your tax refund."
There ARE, however, tax sites (which I have pointed to) which DO SAY that the "hybrid tax credit will not decrease your tax liability below zero" and that it is "non-refundable." That sounds like to me that you cannot increase your refund.
I understand that we all want to take the credit as a "tax rebate" but I just don't think that's what it is. If it was a rebate they would call it a rebate.
I'm still looking for the final word.
But all I'm saying is this:
There is nowhere, ANYWHERE, on the irs.gov site or anywhere else, which says "the hybrid tax credit will increase your tax refund."
There ARE, however, tax sites (which I have pointed to) which DO SAY that the "hybrid tax credit will not decrease your tax liability below zero" and that it is "non-refundable." That sounds like to me that you cannot increase your refund.
I understand that we all want to take the credit as a "tax rebate" but I just don't think that's what it is. If it was a rebate they would call it a rebate.
I'm still looking for the final word.
Pretty Darn Active Enthusiast
Joined: Aug 2006
Posts: 302
From: Southern California
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
Originally Posted by lars-ss
There is nowhere, ANYWHERE, on the irs.gov site or anywhere else, which says "the hybrid tax credit will increase your tax refund."
There ARE, however, tax sites (which I have pointed to) which DO SAY that the "hybrid tax credit will not decrease your tax liability below zero" and that it is "non-refundable." That sounds like to me that you cannot increase your refund.
There ARE, however, tax sites (which I have pointed to) which DO SAY that the "hybrid tax credit will not decrease your tax liability below zero" and that it is "non-refundable." That sounds like to me that you cannot increase your refund.
I think the "owe" wording from the quote you took from the IRS website (and other tax proffesional webites you sited) is misleading...that "owe" should have read "liability". The "owe" that YOU are thinking of is AFTER filling out your tax to the end, which is not what the hybrid tax will offset against.
Im not going to point out anything everyone else have already here...(I'm not a tax professional)
Just be careful about reducing your withholding for what you *thought* you'd need to get your full hybrid credit. Reducing it too much may make you end up paying tax underpayment fees and back interests (if the final "owe" numbers is too much).
Thread Starter
|
Ridiculously Active Enthusiast
Joined: Jul 2004
Posts: 1,430
From: Phoenix, AZ
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
I finally found a site which had what I think is a good example.
So that explains it a little better I think.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
Let's give two examples to explain the concept. Joe is a salaried employee and earns $50,000 a year. His federal income tax withholding amounts to $8,595 for the whole year. (Let's also assume Joe is single with no kids.) I calculate a 2004 tax liability of $7,256 with no other deductions or credits. Based on this straightforward situation, Joe would have a refund of $1,339. (Tax liability minus withholding.)
Now, Joe is thinking about buying a hybrid car. The anticipated hybrid car tax credit will be $3,150. This tax credit first reduces Joe's tax liability (but not below zero). So Joe's tax liability is now $4,106. (Gross tax liability minus hybrid car tax credit.) This in turns boosts Joe's tax refund to $4,489. So it does look like the hybrid car tax credit increased Joe's refund. But it's really reducing his liability.
Mary, Joe's sister, is also thinking of buying a hybrid car. But Mary's tax liability is (let's say) $1,000. If she buys the same car with a $3,150 tax credit, only $1,000 of that tax credit will be applied to her taxes. The rest of the credit will sit unused. Yes, it will still boost her refund, but not as much.
Now, Joe is thinking about buying a hybrid car. The anticipated hybrid car tax credit will be $3,150. This tax credit first reduces Joe's tax liability (but not below zero). So Joe's tax liability is now $4,106. (Gross tax liability minus hybrid car tax credit.) This in turns boosts Joe's tax refund to $4,489. So it does look like the hybrid car tax credit increased Joe's refund. But it's really reducing his liability.
Mary, Joe's sister, is also thinking of buying a hybrid car. But Mary's tax liability is (let's say) $1,000. If she buys the same car with a $3,150 tax credit, only $1,000 of that tax credit will be applied to her taxes. The rest of the credit will sit unused. Yes, it will still boost her refund, but not as much.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
Last edited by lars-ss; Sep 29, 2006 at 03:00 PM.
Pretty Darn Active Enthusiast
Joined: Aug 2006
Posts: 302
From: Southern California
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
Originally Posted by lars-ss
I finally found a site which had what I think is a good example.
So that explains it a little better I think.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
So that explains it a little better I think.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
Making sure that their tax LIABILITY (I almost used the word "owed") is more than their hybrid tax credit is a bit harder to do...something that most people tries to do the opposite. You can do that, I guess, by selling your stock or something, which would inrease your income, and hence your income tax (inrease your tax LIABILITY).
We have NO tax professional member here at all!?! Dont tax professionals drive hybrids?!?
Ridiculously Active Enthusiast
Joined: Nov 2005
Posts: 955
From: Chicago area
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
I find it slightly funny that, after all that stuff about how people in the thread aren't tax professionals or citing to IRS websites, saying they basically aren't authoritative enough to believe, when Larry finally found a quote that supports everyone else's conclusion, he didn't cite it to a source. 
Citation, Larry?
Citation, Larry?
Ridiculously Active Enthusiast
Joined: Mar 2006
Posts: 1,401
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
Originally Posted by lars-ss
I finally found a site which had what I think is a good example.
So that explains it a little better I think.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
So that explains it a little better I think.
As long as you tax LIABILITY is higher than your hybrid tax credit amount, you CAN receive a dollar for dollar tax refund amount which includes the hybrd tax credit.
If this page is correct, anyway.
So, in summary: Anyone wanting to claim full dollar for dollar benefit of the tax credit had better make sure that they OWE MORE TAXES for 2006 than the amount of their hybrid tax credit. If you only owe $2000 in taxes for the year, then you can only get the dollar for dollar benefit of $2000 for any hybrid tax credit.
Energy Independence
Joined: Feb 2006
Posts: 1,282
From: Richardson, TX
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
Whew!
Lots of good posts. Even though you were taking some heat for it Larry, it's good to try to ensure we "got it right."
And that's what I originally thought, when this whole tax-credit came along for 2006 taxes! I know a LOT of posts were flying on this site back when the credit first surfaced.
I remember reading some of those same sites, Larry, and found it quite confusing. I think some of these people intend for it to be confusing (it equals better tax-preparation business!). It would NOT have been difficult to state TAX LIABILITY, rather than letting us to our own devices in interpretation.
As long as your tax liability (before applying the tax credit) is greater than the tax credit itself, then you get full value of the tax credit. For most of us, that shouldn't pose any problems in getting a full tax credit.
Lots of good posts. Even though you were taking some heat for it Larry, it's good to try to ensure we "got it right."
And that's what I originally thought, when this whole tax-credit came along for 2006 taxes! I know a LOT of posts were flying on this site back when the credit first surfaced.
I remember reading some of those same sites, Larry, and found it quite confusing. I think some of these people intend for it to be confusing (it equals better tax-preparation business!). It would NOT have been difficult to state TAX LIABILITY, rather than letting us to our own devices in interpretation.
As long as your tax liability (before applying the tax credit) is greater than the tax credit itself, then you get full value of the tax credit. For most of us, that shouldn't pose any problems in getting a full tax credit.
Active Enthusiast
Joined: Jul 2006
Posts: 162
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
I think the takeaway point here is to remember that Larry was trying to do us all a service, in letting us know of a possible pitfall in this tax credit. Trying to interpret the legalese of the IRS can be most confusing, and I am glad he brought this to our attention, because I know that in reading the first few posts of this thread...I actually said out loud "OH Sh**T".
Well if it's the thought that counts, I heartily applaud Lars for bringing this to our attention, (although I am curious why it was posted in this obscure forum as opposed to or linked from the Gen Disc or Camry forums ;-) ) Maybe I just missed it there.
So Larry, bottom line THANK YOU for bringing up this subject! I agree that you were dealt with a little heavy-handedly by some who were trying to shine light on the interpretation of the rule, but thanks for sticking your neck out for the rest of us - you could have just not said anything at all and we all might have been in for a big surprise come tax time.
Either way, I think you were smart to mention reducing withholding amounts for the remaining quarter of 2006. Out of curiosity...did you reduce your withholding as a safety net, or was the discussion here enough for you to maintain status quo??
Well if it's the thought that counts, I heartily applaud Lars for bringing this to our attention, (although I am curious why it was posted in this obscure forum as opposed to or linked from the Gen Disc or Camry forums ;-) ) Maybe I just missed it there.
So Larry, bottom line THANK YOU for bringing up this subject! I agree that you were dealt with a little heavy-handedly by some who were trying to shine light on the interpretation of the rule, but thanks for sticking your neck out for the rest of us - you could have just not said anything at all and we all might have been in for a big surprise come tax time.
Either way, I think you were smart to mention reducing withholding amounts for the remaining quarter of 2006. Out of curiosity...did you reduce your withholding as a safety net, or was the discussion here enough for you to maintain status quo??
Veracitorian Muser
Joined: Jun 2006
Posts: 336
From: Tempe, Arizona
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
-- Alan
Active Enthusiast
Joined: Jul 2006
Posts: 162
Re: 2006 Hybrid Tax Credit is NONREFUNDABLE
It's smart, because at the time he posted it neither he nor the majority of us had a clear handle on the true interpretation.
It's smart because reducing withheld amounts for the final quarter of the year would probably not adversely affect the majority of this forums' readers, provided they were properly withheld for the prior months of the year, and it would be good prophylaxis to ensure you capitalized on the credit if in fact it was inapplicable for redemption to those who had already satisfied their tax liability for the year.
Now that we can all armchair QB this, it doesn't matter much, but it was smart that he mentioned it and shared with the rest of us.
