EV Tax credit and Tax Software.

There may or may not be a net benefit. Converting from IRA to Roth IRA assumes that taxes you paid to convert to a Roth IRA now will not grow faster than the eventual tax you pay on the balance that you withdraw. It's not clear-cut.

Assuming you paid 20% taxes - you can invest in 10K in a traditional IRA or 8K in a Roth IRA for the same amount of money today. The 10K Traditional IRA will definitely be worth more than the 8K Roth IRA when it's time for the withdraw; the gamble is will it be worth more or less than the taxes you pay then? That factors a lot of things that are unknown - future tax rates, your personal tax situation in the future, and the future political climate. If laws get passed that tax asset values for example, a Roth IRA's value may be included in the future. Even the Roth IRA itself might get taxed in the future, at perhaps a lower rate.

 

The idea is not to leave any of the free $7,500 tax credit on the table because you don't owe enough without the conversion.

 

Totally with you on that - you definitely do *not* want to leave any of that $7500 tax credit behind! However, if you have other options for increasing your income, like selling mutual funds or stocks for capital gains, that might be as good of an option.

 

Thanks, all. That cleared it up in my mind.


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Just don't be that poor chap who claimed two $7,500 tax credits in the same year for trading up a Jaguar E-Pace for another E-Pace. In most cases, one could claim the credit for 10+ consecutive years and save $75,000+ in taxes.

 

I'll say thanks too. I was thinking about withholdings and not about conversion. I'm not old enough to worry about that yet.

 

Just an update on our trials and tribulations with the Federal tax credit: None of the free online services through the IRS worked. We tried them all. We were finally able to get the IRS to accept our return with the EV and charger credits by filing online with Turbotax. The IRS would not accept the same return filed directly from us despite multiple attempts over a period of weeks. Very frustrating. On the upside, it was worth the $50 dollars for the Turbotax as we got our refund in our account in only four business days!!

 

Dang, we used H&R block back in Feb without any problems. I don't know why TurboTax was so far behind.

 

Used TurboTax last night and taxes were filed with the $7500 tax credit, so we'll be getting a nice refund! I would have been happy if I had bought my SE without counting on that $7500, so this just makes all the fun I've been having with my SE for the last 10 months even better!

 

Just a clarification: The issue was we were trying to avoid buying software to do our taxes. We have always done our own taxes for over 30 years. We have a very simple tax return. We were basically forced to buy software to get the IRS to accept our return online (I assume because we were getting such a large refund). What a racket.

 

We owed a few thousand before I entered in the details for my SE (TurboTax). Now, we're getting $3k back from the Fed! Such a nice bonus on top of having a fun car to drive (and cheap to operate).

 

Oh, I see. Thankfully I get H&R Block free through my employer.

 

You have to check the free file government website to see who offers it free in your state at your income. Tax act was good for me and supported EV tax credits.

 

As I noted earlier, we tried all the free tax apps through the IRS. Each one either didn't work or wanted paid up to $80 to actually do the e-file. I heard on the national news last week consumer groups are being flooded with complaints about these "free" tax apps offered through the IRS. They get all your confidential information and only tell you at the end they can't process your return or will charge you to actually submit your tax return. Disappointing, but not surprising.

 

We broke down and bought Turbotax for $50 to e-file our Federal return. It also calculated our state return. But there was a big catch - to e-file our state return would cost another $45! Also, just like the Federal return, none of the "free" tax apps for e-filing worked or they wanted a charge to e-file our state return. We ended up and mailed our state return even though we intended to e-file. (Last year it took over three months to get our state refund after mailing in our return.)

 

I’m grateful our state has been online e-file for over 10 years now.

 

I would rather mess with the forms, and get the state tax credit than not have the forms and credit and pay the difference in other taxes.