$7500 tax break question....

[TJ17]

Hey there I put a deposit down on an AWD VW ID4 a few weeks ago. I'm thinking it will be quite a while before I get my car, maybe late this year or early next year. What year is the tax credit going to be for? 2023 or this year? Does it depend on whether my car gets here this year or next year?
The only reason I’m asking is because I switched accountants last year, and she saved me so much money that I don’t have to pay federal income tax this year. If the tax credit is only for 2022, I won’t get the $7500, but I will if the tax credit is for 2023.

 

[marshall]

The following requirements must be met to qualify for the credit.

• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
  
  
• You placed the vehicle in service during your tax year.
  
  
• The vehicle is manufactured primarily for use on public streets, roads, and highways.
  
  
• The original use of the vehicle began with you.
  
  
• You acquired the vehicle for use or to lease to others, and not for resale.
  
  
• You use the vehicle primarily in the United States.

https://www.irs.gov/instructions/i8936

I believe once you sign the papers transferring ownership to you, that's the year the car is put into service.

I seem to remember one person buying in late December thinking the dealership had agreed to mark the date of sale in January but they didn't, and he couldn't claim the tax credit due to circumstances like yours.

 

[Puppethead]

The only reason I’m asking is because I switched accountants last year, and she saved me so much money that I don’t have to pay federal income tax this year.

Does this refer to the taxes you just filed? That would be for the 2021 tax year, and you generally have until the filing deadline in April 2023 to make any adjustments to taxable income for 2022.

 

[TJ17]

I seem to remember one person buying in late December thinking the dealership had agreed to mark the date of sale in January but they didn't, and he couldn't claim the tax credit due to circumstances like yours.

OK thank you very very much!

 

[TJ17]

Does this refer to the taxes you just filed? That would be for the 2021 tax year, and you generally have until the filing deadline in April 2023 to make any adjustments to taxable income for 2022.

I don’t know why I said last year, it was March of this year, so she prepared my taxes for 2021. By the time I met with her, I had already paid my estimated taxes for 2021, which she said I had over paid by quite a bit; enough that I don’t have to pay estimated taxes for 2022. In light of the post before yours, it looks like I should keep my fingers crossed that my car doesn’t come in until 2023. I don’t know, maybe I should cancel my order right now and start a new order in a few months, when I will be more certain that the car will be signed into my name in 2023. What a mess.

 

[marshall]

Have you checked with your dealer to see if they have any idea as to when your car will arrive? Was your order placed before or after VW announced that they had sold out for 2022?

 

[TJ17]

Have you checked with your dealer to see if they have any idea as to when your car will arrive? Was your order placed before or after VW announced that they had sold out for 2022?

I will call the dealership later on, thank you. I don’t know when the sold out announcement was, but I placed my order about six weeks ago.

 

[Scrambler]

enough that I don’t have to pay estimated taxes for 2022.

The tax credit isn't affected by how much you've already paid/overpaid your estimated taxes or withholdings, it's affected by your overall tax liability - or what the amount owed would be if you hadn't already paid anything. The credit being "non-refundable" just means that it can't lower your tax liability below zero, but you can definitely have withholdings/estimated payments refunded as a result of the tax credit. You may want to check with your tax professional about what your anticipated tax liability will be for 2022.

The only reason I’m asking is because I switched accountants last year, and she saved me so much money that I don’t have to pay federal income tax this year.

I had already paid my estimated taxes for 2021, which she said I had over paid by quite a bit; enough that I don’t have to pay estimated taxes for 2022.

Not sure how this works. Overpayment on 2021 taxes would have been refunded to you, I don't think they would carry over to offset 2022 taxes.

 

[TJ17]

Not sure how this works. Overpayment on 2021 taxes would have been refunded to you, I don't think they would carry over to offset 2022 taxes.

oh wow, thanks for this information. Yes I will call my accountant and ask her. The deal with not paying federal taxes this year was that she said I could either have the IRS send me a refund for my overpayment last year or I could use that money as a credit toward my taxes this year. I chose the latter. I am pretty stupid when it comes to taxes so I don’t know if that makes any sense to you.

 

[Scrambler]

oh wow, thanks for this information. Yes I will call my accountant and ask her. The deal with not paying federal taxes this year was that she said I could either have the IRS send me a refund for my overpayment last year or I could use that money as a credit toward my taxes this year. I chose the latter. I am pretty stupid when it comes to taxes so I don’t know if that makes any sense to you.

Yeah, that makes sense. It's basically giving the government a free loan though. You could take the refund, put it in savings/emergency fund, then use it to pay taxes the next year. Either way though, not "owing" when you file your tax return isn't the same as not having a tax liability. Definitely check on what your tax liability would be. I set my withholdings so my refund/amount due is usually within $100. Even though I won't owe anything for my 2022 taxes next April, I expect to still get a check for $7,500 from buying my MINI.

 

[TJ17]

Yeah, that makes sense. It's basically giving the government a free loan though. You could take the refund, put it in savings/emergency fund, then use it to pay taxes the next year. Either way though, not "owing" when you file your tax return isn't the same as not having a tax liability. Definitely check on what your tax liability would be. I set my withholdings so my refund/amount due is usually within $100. Even though I won't owe anything for my 2022 taxes next April, I expect to still get a check for $7,500 from buying my MINI.

Right on, I very much appreciate your help this morning! My accountant is going to call me back in a little bit. Maybe I was all worried for nothing!