Irs Issues Tax Credit Amount For Toyota Camry Hybrid

Irs Issues Tax Credit Amount For Toyota Camry Hybrid

IRS Issues Tax Credit Amount For Toyota Camry Hybrid
Prior to​ January 1,​ 2018,​ people purchasing hybrid vehicles were eligible to​ claim a​ significant tax deduction. Now they can claim a​ monstrously large tax credit.
IRS Issues Tax Credit Amount For Toyota Camry Hybrid
The government attempts to​ modify the​ behavior of​ taxpayers by applying or​ reducing taxes on​ certain activities. ​alcohol​ and cigarettes are viewed as​ health risks,​ so the​ government adds excessive taxes to​ them to​ try to​ discourage their use. on​ the​ energy front,​ the​ government is​ in​ favor of​ people buying hybrid vehicles as​ part of​ the​ effort to​ reduce our nation’s oil dependence. to​ facilitate this policy,​ the​ government is​ giving people who buy hybrids a​ huge tax windfall.
To understand the​ windfall,​ you​ need to​ understand the​ difference between a​ tax deduction and tax credit. a​ deduction is​ something you​ reduce from your gross income. a​ $1,​000 deduction may save you​ $200 to​ $400 depending on​ your tax bill. a​ tax deduction is​ a​ positive thing,​ but pails in​ comparison to​ a​ tax credit.
A tax credit is​ not deducted from your gross income. it​ is​ deducted directly from the​ amount of​ tax you​ owe. Using the​ previous example,​ you​ would figure out how much tax you​ owe for the​ year and then deduct $1,​000 from it. Put another way,​ the​ tax credit represents a​ dollar for dollar savings on​ the​ actual amount of​ taxes you​ owe,​ a​ huge savings.
To promote hybrid cars,​ the​ federal government lets purchasers claim a​ tax credit amount set by the​ IRS. the​ credit can be as​ high as​ $3,​400,​ but is​ often a​ bit less. the​ IRS has just released technical guidance indicating it​ will allow taxpayers to​ claim a​ tax credit of​ $2,​600 if​ they purchase a​ 2018 Toyota Camry Hybrid after January 1,​ 2018.
For example,​ if​ you​ go out and purchase the​ car tomorrow,​ you​ are going to​ be very happy when you​ prepare your taxes for 2018. Let’s assume you​ do your taxes next March for 2018 and find out you​ owe $10,​000 to​ the​ IRS. you​ would apply the​ $2,​600 tax credit to​ that amount,​ reducing your tax bill to​ $7,​400. Not bad,​ eh?

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