The IRS is working its way through various automobiles that qualify their owners for tax credits. The Saturn model of cars has just been reviewed with one particular model being approved. IRS Approves Saturn Vue Green Line for Tax Credit Owning a hybrid car was pretty much a financial windfall from the outset. The cars provided tremendous savings on fuel costs. With gas costing a vicious $3.90 a gallon in San Diego, the savings are not to be understated. On top of this, the purchase of these vehicles also provided the owners with a $2,000 tax deduction, a very nice perk indeed. In 2005, things got even better. The passage of the Energy Policy Act of 2005 was something of a godsend to hybrid vehicle manufacturers. Frankly, the CEOs of these companies must have dropped to their knees and openly wept. This moment of humanity had everything to do with the change of one word in how hybrids were viewed for tax purposes. Individuals who purchase new hybrids approved by the IRS no longer where eligible for a tax deduction. Nope. The word deduction had been changed to credit, a massive difference in the world of tax returns. A tax credit is so much more valuable than a tax deduction it isnt even funny. A tax deduction is an amount that reduce your adjusted gross income. Once all deductions are taken out, you then head to the tax tables and figure out what you owe. A tax credit, on the other hand, isnt taken out of your gross income. Instead, you claim all you deductions, go to the tax tables to figure out what you owe and then apply the tax credit to that amount. For instance, if you determine from the tax tables that you owe $10,000 in taxes for the previous year, you can then reduce this amount by the tax credit. In this case, we are talking about the tax credit amount issued by the IRS for the Saturn Vue Green Line. For the 2007 model year, you can claim a tax credit of $650. You must purchase the car new from the manufacture [thus the weeping CEO]. Moreover, the amount of the credit starts falling after the 60,000th vehicle is sold, so you need to go buy one now [more weeping and hysterical laughter from the CEO]. Most people complain about a lack of tax deductions when it comes time to file tax returns. Tax deductions are nice, but tax credits are where the real savings occur. |
