"$7500" tax credit?
- Thread starter Dewayne
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Louis Nisenbaum
Member
You need a 7500 tax liability to get the entire 7500 credit.
KentuckyKen
Well-Known Member
Was your tax liability only $1,900?
It’s a credit and not a deduction. So if you don’t owe the full $7,500, you will only get back what you owe. It’s also completely irrespective of any previous payments you’ve already made.
It’s a credit and not a deduction. So if you don’t owe the full $7,500, you will only get back what you owe. It’s also completely irrespective of any previous payments you’ve already made.
Claritydfw
Member
Look at line 63 on your 1040. Is it less then 7500?
craze1cars
Well-Known Member
I will be getting a $7420 credit...just cuz of how things lined out for me this year, that is how much tax I owe...I’m leaving only $80 of my Clarity rebate on the table.
I can see this really surprising quite a few people who don’t truly understand tax law and were expecting to get the full amount, particularly lower wage earners and people who in general for whatever reason are not required to pay the feds very much this year.
I was a bit surprised as the Trump tax cuts were frankly stunning for me. In 2017 I paid $15k to the feds. SURELY I’d get my full $7500 rebate for the car. But this year my tax bill is only $7,420. Of course due to the Clarity that becomes zero and I’ll get it all back! This despite the fact that my income was nearly equal within $600 both years, though the sources of the income changed dramatically.
I almost feel guilty. Haven’t had a zero fed tax bill since I was about 14 years old. And here I will not contributing one red cent to the national coffers for 2018, despite being an upper middle class DINK household. While I have personally benefited, that’s a seriously broken system. The deficit has to be staggering...but now we drift into political discussion, so I’ll stop there.
I can see this really surprising quite a few people who don’t truly understand tax law and were expecting to get the full amount, particularly lower wage earners and people who in general for whatever reason are not required to pay the feds very much this year.
I was a bit surprised as the Trump tax cuts were frankly stunning for me. In 2017 I paid $15k to the feds. SURELY I’d get my full $7500 rebate for the car. But this year my tax bill is only $7,420. Of course due to the Clarity that becomes zero and I’ll get it all back! This despite the fact that my income was nearly equal within $600 both years, though the sources of the income changed dramatically.
I almost feel guilty. Haven’t had a zero fed tax bill since I was about 14 years old. And here I will not contributing one red cent to the national coffers for 2018, despite being an upper middle class DINK household. While I have personally benefited, that’s a seriously broken system. The deficit has to be staggering...but now we drift into political discussion, so I’ll stop there.
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Olimpia
Member
This worries me a bit. For 2017 our tax liability was around 11K. I guess we will have a better picture when we file our taxes for 2018 (soon) but since I bought the car in 2019 I will have to wait another year and see if I have to make adjustments based on what my 2018 filing tells me.
Because you bought your Clarity this year, if you have regular IRAs, you can still do the Roth conversion to create additional tax liability.
MPower
Well-Known Member
The tax credit is what as known as a nonrefundable credit. That is it is set against whatever tax you owe for the year you buy the car. if you don't have enough tax liability in that year, you will not get all the credit. Unfortunately, you cannot roll over the unused portion to the next tax year so you leave that portion on the table.
It is very unfair. it means that lower income people do not get to take full advantage of the credit and end up effectively paying more for their car. The only work around is in those states that require dealers to deduct the credit (which they get) when calculating the amount of a lease. Or if you can dicker a dealer by telling them that you will make the purchase in another state or at another dealer who will give you a deduction for the credit that they will be claiming. $7500 would be worth taking a trip for.
It is very unfair. it means that lower income people do not get to take full advantage of the credit and end up effectively paying more for their car. The only work around is in those states that require dealers to deduct the credit (which they get) when calculating the amount of a lease. Or if you can dicker a dealer by telling them that you will make the purchase in another state or at another dealer who will give you a deduction for the credit that they will be claiming. $7500 would be worth taking a trip for.
Did you contributed deductable traditional IRA? If so, you might be able to not claim the deduction and record it as non-deductible IRA. These money won't be taxable on withdrawal. Not quite sure about earnings. Please consult an accountant before doing so.
Alright, nevermind, this is far too much work for 80 bucks....
Olimpia
Member
Most of our investments are already in Roth...oops! We do have some in traditional so if worse comes to worst we can do the conversion.
craze1cars
Well-Known Member
Like you say...not worth the effort for such a small amount...but I JUST rolled a 403b into my first traditional IRA about 2 months before the end of the year...not sure if I could roll a small amount of that new IRA again to a Roth so quickly? Maybe. But I didn't contribute to it, I rolled to it. Again not worth finding out. And we do also have 401k, Roth, and SEP plans...best of my knowledge that little trick doesn't work with any of those, though to be fair I'm not sure about possibly converting a bit of the SEP...but doubtful they have their own set of rules.
Anyway before anyone panics please realize my tax situation was extremely unique this year, especially compared to the prior year. After a few years of successful self-employment, this year I closed down that one self-employed venture, opened/started a new self-employed venture (which to-date has been a reportable loss only due to start-up expenses...will start profiting about now), also I actually had salary income but for only 7 months, in conjunction with wife's retired school teacher pension continuing to come in. Not to mention buying a Clarity.
So this entire tax year 2018 for me was royally screwball and essentially unpredictable, compared to prior year which was far more conventional...simply wife's pension plus my profitable self-employed business. Basically due to start-up expenses of new business, I avoided paying self-employment tax for this year, which anyone self-employed knows is a pretty solid hit compared to being salaried somewhere. But now with the 20% pass-thru entity deduction it's a bit less noticeable than it had been.
Anyway...long way of saying don't let my personal experience worry you too much. The recent tax revisions REALLY benefit the self-employed...the goal of the whole revision was to kick-start small business investment. So that hit me hard in a very good way this year as I had 2 distinct small businesses to use the new tax rules on, one being a slightly money-losing start-up. But for those of you who may have mortgages and high property taxes in high real-estate value and high wage areas, who are not self-employed...some of you are actually being penalized by the Trump tax plan and will pay more this year than last year, while a good portion of the rest of the country will see a reduction in federal taxes paid. But every individual will be drastically different.
Suffice it to say this is a tax shake-up like we have not seen in many decades. There are LOTS of people are being surprised right now, and yet more will be surprised come end of February, when more of the masses start filing and/or calculating their 2018 taxes in droves.
If any of you non-retired people have the opportunity to change from being a salaried employee to a self-employed contractor, you really need to look into this...it may save you a TON of money under the new tax rules, until at least 2025. There are rules and not everyone is allowed to do this, but you owe it to yourself to look into the possibility. A whole new normal is starting up right now. As I said, the changes are frankly staggering...and a lot of people don't even realize it.
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JulianClarity
Active Member
It is truly impressive, you got to save big money. Don't worry, no matter who the president is, when the government needs money, it taxes more on my class. I am fully motivated for more wages all the time for my SIWK, [emoji846][emoji846][emoji846]
megreyhair
Active Member
@craze1cars
Glad you are paying less this year than last. Mine is the exact opposite. I m in NJ and i lost over 15k in deductions.
Glad you are paying less this year than last. Mine is the exact opposite. I m in NJ and i lost over 15k in deductions.
1) Dealers NEVER get the Fed Tax Credit, only the purchaser of the vehicle (when leasing, the finance company purchases from the dealer and "rents" it to you)
2) What States require the Fed Tax Credit be applied towards a lease? I've never heard of this before.
But yes, the tax credit model does mean lower income (often retired) people that purchase a new EV cannot take full advantage of the credit. I'd rather see a $5K refundable credit in play than $7,500 nonrefundable.
LegoZ
Active Member
Or allow carryover due like the residential energy credits for solar/geothermal etc
My tax liability was fairly high but since property tax and sales/income tax deduction is capped at 10k I won’t be able to fully eliminate fed income tax last year. That is with $7500 for the car and $9300 for solar.
Also after I put in the $2500 TCEQ grant income my liability will go a a bit more. Still I am getting back ALOT of my withholdings from last year.
DI1K
Especially with the tax credit nuances, it's important to do a full comparison between leasing and purchasing (I was guilty of ignoring the idea of leasing until recently). I don't think any state *requires* the leasing company to reduce the capitalized cost by the amount of the credit, but if they don't it's probably not a good lease offer relative to others or to purchasing. In CA/OR Honda's published lease offer shows the reduction; that doesn't mean that other places won't include it, just that you need to look carefully at all the numbers and ask.
For some people, leasing is the only way to get the full tax credit; for others it's a way to get the credit now instead of waiting until next year; in some places taking the credit off the top of the lease reduces the sales tax paid; and for others it doesn't matter either way and purchasing makes more sense, especially if you can get a longer term low interest loan (financing the residual to buy at the end of the lease would be at used-car rates).
I'm personally comparing paying cash, taking a loan, and leasing side by side, trying to take into account all of the payments and alternate investments (e.g. paying $14k more now when purchasing vs investing a bit less and paying that $14k at the end of a lease).
For some people, leasing is the only way to get the full tax credit; for others it's a way to get the credit now instead of waiting until next year; in some places taking the credit off the top of the lease reduces the sales tax paid; and for others it doesn't matter either way and purchasing makes more sense, especially if you can get a longer term low interest loan (financing the residual to buy at the end of the lease would be at used-car rates).
I'm personally comparing paying cash, taking a loan, and leasing side by side, trying to take into account all of the payments and alternate investments (e.g. paying $14k more now when purchasing vs investing a bit less and paying that $14k at the end of a lease).
Claritydfw
Member
How is it unfair for those that don’t have to pay any taxes? That person already got to take advantage of the progressive tax system that allows them to pay little to no taxes i.e. they did not pay their “fair share”
Rant off
But for those that can’t take full advantage of the tax credit related to a retail purchase they have the opportunity to lease and still get to take advantage of the 7500 credit. Seems to me they are not excludded from the Tax credit only how they have to use it.
MPower
Well-Known Member
@craze1cars
Are you able to depreciate any of your business setup costs instead of expensing them. If could increase your tax liability in the car purchase year so you could take more of the credit and then use them as deductions in subsequent tax years. I had to do that when I purchased my 2006 Prius, because I got caught in the not-enough-tax-trap.
This time I did a comprehensive review of my taxes before i bought the car, because without the credit the cost would have been way beyond my comfort level.
Are you able to depreciate any of your business setup costs instead of expensing them. If could increase your tax liability in the car purchase year so you could take more of the credit and then use them as deductions in subsequent tax years. I had to do that when I purchased my 2006 Prius, because I got caught in the not-enough-tax-trap.
This time I did a comprehensive review of my taxes before i bought the car, because without the credit the cost would have been way beyond my comfort level.
craze1cars
Well-Known Member
Thanks for the tip! Not sure I have much I can depreciate just starting a handyman business. Mostly tools and supplies, advertising and marketing. No major assets. Maybe the computer that’s the most expensive thing I bought and expensed...maybe it should be depreciated over time. Will look into the idea but again I’m talking about $80 here. Might just let the feds have it lol.
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