California deals for December - Clarity PHEV base or touring ???

[Richard_arch74]

I was told by my tax preparer CPA that the $7500 is a tax credit - not a refund.
In order to recoup the $7500 on my Federal 1040, I have to owe over $7500 in order for the credit to apply.
Otherwise, he said, if I owe less, I can carry over to the next tax year.

That is not what my CPA said. He was clear that the vehicle federal tax credit DOES NOT carry over to the following year in which the vehicle was purchased (and delivered).

Prehaps he was referring to the solar/wind federal tax credt which WILL/CAN carry forward for a few years until all of it is used up. I say a few years because it is not yet clear if the IRS will continue to carry over any remain unused credit once the solar/wind credit goes away (which starts to go away next year, I think).

You may want to get a second opinion

Sent from my SM-G955U using Inside EVs mobile app

 

[banshee2008]

Since the EV tax credit is a "non-refundable" tax credit, I wanted to find out what that really means. I found a good explanation on "thefinancebuff":
https://thefinancebuff.com/refundable-tax-credit-and-non-refundable-tax-credit.html

It is very confusing because "non-refundable tax credit" makes it sound like you won't get a refund from the tax credit if you have no taxes due at end of year (due to withholding, etc.). But the tax credit is based on your tax liability (total taxes you have to pay for that year) as opposed to taxes due (tax liability - tax that has been withheld). So you CAN get a "tax refund" (in common parlance, this is the check the government gives you when you have overpaid taxes) from the "non-refundable" EV tax credit.

Below is the text from thefinancebuff.com that explains all this. I am not a CPA...just a cut-and-paster who is assuming the finance buff knows what they are talking about.


"Within tax credits, some are refundable tax credits and some are non-refundable tax credits. Here the word refundable often causes confusion because most people refer to the difference between their tax withholding and their total tax as the tax refund.

Tax Refund (R) = Tax Withholding (W) – Total Tax (T)

When they hear that a tax credit is non-refundable, they think they are not going to get the tax credit if they receive a refund versus owe taxes when they file their tax return by April 15, because the credit is, uh, non-refundable. Actually that’s not the case.

Non-refundable does NOT mean it’s not going to be included in the tax refund. It has to do with how it works against your total tax (T) in the above equation. That’s the total tax you are supposed to pay for the year after all the adjustments, exemptions, deductions, and credits are taken into consideration. Most people already satisfied that through tax withholding on their paychecks or by making estimated tax payments.

A refundable tax credit can reduce your total tax to a negative number, which means the government pays you. For example suppose your total tax before the tax credit is $1,500, a $2,000 refundable tax credit means you not only get back everything you paid through tax withholding, but you also get an extra $500 back from other taxpayers. Your total federal income tax for the year is negative.

A non-refundable tax credit can reduce your tax to zero but your tax can’t go below zero. For example suppose your total tax before the tax credit is $1,500, a $2,000 non-refundable tax credit means you will get back everything you paid through tax withholding and that’s it. Your actual benefit from this non-refundable tax credit is $1,500, not $2,000."

If you pay enough taxes, it doesn’t matter whether a tax credit is refundable or non-refundable. Otherwise, a $100 refundable tax credit is better than a $100 non-refundable tax credit.