Electric Vehicle

[pmedders]

Client purchased a Honda hybird vehicle in September of 2004 for personal use but did not mention purchase in 2005 when handled 2004 tax return. In January 2005, client transferred vehicle into his S-Corp for business use. Is the only way to claim the tax credit is to file an amended 2004 tax return? Or, being it was transferred into S-Corp in 2005, can he take the deduction for 2005?

[veritas]

There was no credit for hybrids. It was a deduction. Amend 2004 return.

http://www.fueleconomy.gov/feg/tax_hybrid_old.shtml

[S T]

Hybrid

Wasn't it an adjustment to income in the year purchased and therefore should have been deducted on form 1040.

Individuals must use Form 1040, not one of the shorter forms, to claim this deduction. They should put "Clean-Fuel" and the deduction amount on the dotted line to the left of line 36, including this amount in that line's total adjustments to income. (They would have used line35 on the 2004 Form 1040; line 33 on the 2003 Form 1040; line 34 on the 2002 form; line 32 the previous two years

from http://www.irs.gov/newsroom/article/...104549,00.html

I would say amended return is in order, probably only for Federal, don't know about your State return.

Not sure, but then doesn't the t/p have to reduce his basis in the vehicle as well before contributing to the S Corp?????

Sandy

[John of PA]

Clarification

The Electric Vehicle Credit, which is a tax credit, has been around a long time and is still around. This credit is for "all electric" vehicles. They are plugged in overnight and ready to go the next day for about 100 miles of driving. They do not use gas at all. (I have driven the GM EV1 and the Toyota RAV4, they are great). Hybrids (like the Honda Civic Hybrid or the Toyota Prius) do not qualify for this credit. For 2005 and earlier returns, the Hybrids qualified for a $ 2,000 page 1 1040 deduction called the "clean fuel deduction" in the year purchased. For 2006 and beyond, the Hybrids qualifiy for the Hybrid Vehicle credit which is an actual tax credit. The Hybrid Vehicle Credit is totally different than and not to be confused with the Electric Vehicle Credit. They are 2 different credits that work differently. Hope this helps. (I bought a Prius back in Jan 06 and will be taking the Hybrid Credit on my 06 1040).

[Gary]

Prius

John:

How do you like your Prius? Is the gas mileage as much as they quote? I'm considering this for my next car.

Gary

[John of PA]

I Like it Very Much

I really like my Prius Very Much. The hatchback is really practical. I love the "stealth" mode when the car glides at low speeds with the gas engine off. Parralell parking is now easy with the rear bumper camera. I also like the fact that the Toyota Prius is rated the lowest polution of all the hybrids, which I feel is important. No the gas mileage is not what they say (like all cars). I only get around 40 to 50 miles per gallon. (in both city and highway driveing, whcih is neat). I don't know where they came up with the 60 mpg that the sticker says, but I don't get that. In the winter, I get maby 30 to 40 mpg (due to the gas engine running more to warm up). The Prius is without a doubt the most high tech hybrid system out there. The Honda, as you may know, gas engine only shuts off when the car is standing still, where the Toyota system will actually drive in electric mode. The Ford Escape system is licensed from Toyota. The citical part of the Toyota system, by the way, was invented here in the states by Solomon Technoligies in Florida, who is actually suing Toyota on patent infrigement. My 06 Prius is my second Prius. I drove an 01 Prius for 4 years and loved it too. Actually I don't get to drive the Prius much anymore becasue my wife takes it, as she does more driving than me.

[Gary]

Thanks

John:

Thanks for the detailed response to my questions.

Gary