Huge score if you bought a hybrid in 2006

By: Michael S Schmidt

There was a new tax credit enacted, regarding hybrid car purchases, which will affect 2006 taxes. Those consumers who purchased one of these energy saving vehicles became eligible for as much as $3400 in federal tax credits under this new ruling. This tax credit can be claimed on a 2006 tax form or on a late 2006 tax return. As economy minded consumers begin to look to hybrids for gas savings, energy value and tax credits, auto manufacturers are beginning to respond with more of these cars being prepared for the marketplace.

Now taxpayers will find that they are able to claim the entire amount of the hybrid vehicles credit 2006 far in the future. It can be claimed as late as the ending date of the first calendar quarter that immediately follows the quarter in which the manufacturer reports selling the 60,000th model of these qualifying hybrids. This means that each of these cars will have entirely different qualifying dates. When the 60,000 mark is reached, the tax credit then will begin to diminish.

The second quarter following the selling date of the benchmark vehicle will find taxpayers able to claim only a 50% credit, then a 25% credit in the following quarter. After this last quarter immediately following the selling of the benchmark vehicle there are no tax credits remaining to be claimed. These credits can have a big impact on a 2006 tax refund and you should check your 2006 tax online to make sure you have claimed a credit if eligible. Depending on the year that your vehicle becomes eligible for a tax credit, it could even affect a prior tax return.

The following requirements must be met by a taxpayer or a business in order to claim the hybrid car tax credits on a 2006 tax return.

• The hybrid auto must be purchased on or before December 31, 2010.

• The hybrid auto must be placed in service after December 31, 2005.

• The vehicle must be originally put into service by the taxpayer to whom the 2006 tax credit is being paid.

• If the hybrid is leased, the leasing company can claim the tax credit, not the taxpayer.

• This hybrid tax credit does not apply to any used hybrid vehicles. The credit only can be claimed by the original purchasers and users of a new hybrid vehicle that qualifies for the tax credit.

• If the hybrid is purchased by a tax-exempt organization, or entity, the person who sold the vehicle is eligible to claim the credit. This can be done only if the seller discloses to the tax-exempt organization, or entity, the amount of the tax credit.

• The hybrid must be used for the majority of the time within the boundaries of the US. Among the qualifying cars are the Honda Civic Hybrid CVT 2006, Honda Civic Hybrid SULEV MT and CVT 2005, Honda Insight CVT 2005-2006, Honda Accord Hybrid AT 2005-2006, Ford Escape Hybrid FWD and 4WD 2006, Mercury Mariner Hybrid 4WD 2006, Toyota Prius 2005-2006, Toyota Highlander Hybrid 2WD and 4WD 2006, Toyota Camry Hybrid 2007, Lexus RX400h 2WD and 4WD 2006 and the Lexus GS 450h 2007.

Uncle Sam makes it harder to give to charity in 2006

By: Michael S Schmidt

Charity donations 2006 rulings are more stringent than those that were able to be used for your prior tax return. Clothing and other appliances or home items that are donated after 8/17/06 will have to be in good used condition or even better condition to qualify as charitable donations. If the taxpayer will include a verifiable and actual appraisal of any one item from the home, they can claim a deduction of more than $500 on their 2006 tax return. Items that qualify for donations include clothing, furnishings, and articles of furniture, electronic items, electrical appliances, and household linens.

Beginning in the 2006 tax year individuals will now be required to fully document all of the cash contributions they provide to charities. There are new regulations to be considered for voluntary contributions of any amount that you plan to include on a 2006 tax form. Taxpayers will need to document each of their cash donations separately and cannot combine them to try to qualify for a larger 2006 tax refund. This means that if you donate $200 dollars in cash every two weeks the donations must qualify for the under $250 rules every time, you cannot combine the amounts and consider them as a $500 monthly or $6000 annual contribution.

Cash Contributions that are Less than $250

If taxpayers have cash contributions that are each less than $250, they must also have one of the following documentations if you plan to claim them on your 2006 taxes.

• A check that is canceled shows the amount or a clear and accurate statement that is able to provide a verified check number with the amount of the contribution, the date of the contribution and the charity that received the money.

• Receipt from a qualified charity with their name, date of the cash donation, and the cash amount that was received.

• Another written and verifiable statement with the above information.

Cash Contributions that are more than $250

If there are cash contributions from a taxpayer that are more than $250, an acknowledgment of this contribution must be obtained from the qualified organization. You will need these statements even if you are filing your 2006 tax online. This must be a written statement that meets the following requirements:

• Any cash donation must be documented, personal records and miscellaneous credit card statements are no longer sufficient for this purpose.

• The statement must certify if you received goods or services in exchange for your contribution.

• If there was an exchange there must be a good faith estimation concerning the real value of these items.

• The statement must be received on or before the date that the taxpayer is going to file a return. The contribution must be completed by this date, including any filing extension. This means that if you are filing a late 2006 tax return you must be sure to have your charitable contributions completed well in advance of this date.