Hybrid Tax Credit Does Not Reduce AMT

The hybrid credit can significantly lower your federal income taxes, but the credit is subject to a number of limitations. Most importantly, the hybrid credit will not reduce a taxpayer's alternative minimum tax.

That's the answer to a question I recently received from Joel in New York. He emailed me to ask, "Is it true that the credit is not available for taxpayers affected by the AMT?"

While taxpayers who have an alternative minimum tax liability can take the hybrid credit, their credit will be limited. The credit will reduce the regular income tax liability, but not below zero. And the credit definitely will not reduce the alternative minimum tax. These two limitations are written directly into the tax law of the credit itself at Internal Revenue Code Section 30B(g)(2).

In general, I recommend taxpayers to claim the credit on the tax return that will offer the greatest tax savings, if the taxpayers are in a position to choose on which tax return to claim the hybrid credit.

More information: Hybrid Tax Credit | Limitations | Eligible Vehicles | Phase-outs | AMT