Alternative Motor Vehicle Credit

Stuart writes:

Gina,
I have a question about the alternative motor vehicle credit. The Ford dealer told me I can take the tax credit for my 2008 Hybrid Escape each year I have it. I'm hearing from others the credit is just for they year purchased. Which one of these is correct?

My reply:

Stuart,

Thanks so much for writing.  As of right now, the original purchaser of a new 2008 Ford Hybrid are allow an alternative motor vehicle credit.  If you were to purchase a 2WD version you would be ELIGIBLE to take a credit up to $3,000 on your 2008 tax return.  If you were to purchase a 4WD version you would be ELIGIBLE to take a credit up to $2,200 on your 2008 tax return.

Just because you're eligible to take the credit does not mean you'll be able to use it.  This credit is not allowed to reduce your regular income tax liability below zero.  If you are eligible to take multiple tax credit, this tax credit is taken last after all other credits have been taken.  If your alternative vehicle credit exceeds your maximum dollar limit, the excess is NOT refundable, nor can you carry it forward to future years.  In addition, if you sell your car before the end of it's useful life (as determined by the IRS), the amount of the credit that you were able to claim may have to be recaptured.

So the short answer is, the salesman was wrong.  The credit on this car is actually very good, but it's a one year shot, which may come back to haunt you if you don't like the car enough to hold onto it.

Best wishes,
Gina


http://GLGcpa.com