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$7,500 EV tax credit

$7,500 EV tax credit

I just called Tesla and they said if I don't OWE on my federal taxes WHEN I do my taxes, then I won't get the $7,500 EV non refundable tax credit, is that right? I usually have about $18,000 federal payroll tax withheld and owe about an additional $2,000 when I do my federal taxes. So I would only be able to use about $2,000 of the tax credit?

DTsea | 03. Juli 2017

No. In that case you owe $20000 in tax and you get the credit.

They mean if you have no federal tax owed at all.

SCCRENDO | 03. Juli 2017

That means you have paid $20k in taxes so you get the full credit. It's not about when you pay it but that you pay over $7500 in taxes.

billy. | 03. Juli 2017

Ok that's what I originally thought, thanks.

reed_lewis | 03. Juli 2017

A better description is that you get a credit off of your total tax liability. If you had withheld $20,000 in taxes last year, but after doing your taxes you only should have paid $19,000 which means you would get a $1000 refund, instead you will get a $8500 refund.

For 2016 taxes, I had a refund of around $18,000 because we bought two EVs and had $3000 in a refund also. It was nice to see that get deposited!

billy. | 03. Juli 2017

@reed_lewis that's a nice chunk of change of a refund. Hopefully it works out for me with the model3 and the tax credit.

psusi | 05. Juli 2017

Yea, my tax liability with the two kids credit and write-offs was not quite $7500 last year so I didn't get the full credit ;(

Still not got my damn refund of all of the withholding.

reed_lewis | 05. Juli 2017

I had extra withholding because I do consulting but I did less consulting last year. It was my money to start with.

rdovale | 17. Juli 2017

I wasn’t aware of that. I only get around $7000 taken out and get back around 1600 refund so I will only get a $5400 refund back? I could take out the 500 a month I get taken out before tax and hope by the end of the year it’ll be close to 9500 taken out (2000 refund plus the EV) but what if I do that now and I don’t get my M3 until January. I ordered first day online is it possible I won’t get until 2018?

rxlawdude | 17. Juli 2017

@rdvale, what you withhold is irrelevant. Your tax liability is $5400. Unless you can increase your taxable income, you will, with the credit, have zero liability snd you get back YOUR money withheld.

rdovale | 17. Juli 2017

The taxable income will increase if I take the 500 out of the pre-tax fund I put it in and just keep it in my income for the year right? It gets taken out before hand so although my income would be 50000 my taxable was only 44000 and the feds didn’t take out as much. Forgive me if I’m confused.

reed_lewis | 17. Juli 2017

This is not hard. Look at your 2016 1040 form. If the line 47 is above $7500 then you should get the full amount of the EV tax credit. The EV tax credit is applied on line 54 The amount you had withheld is entered on line 64 AFTER the EV tax credit is applied. So the amount withheld over the year means nothing.

C'mon people, it is not that difficult...

rdovale | 17. Juli 2017

Line 47 is not going to be over 7500 that’s what I was saying so I won’t get the full credit and it’s going to be even lower this year because I raised the amount ($500 a month) I put in a fund before tax and it’s already the end of July. So I was wondering if I should just put that back in total wages and let them tax that to raise the line 47 and get more of the EV tax break. I think it’ll be more money than I’ll be taxed on with that additional $500 a month.

rxlawdude | 17. Juli 2017

Again, anything that increases your taxable income will work.

Quick math: $500/mo x 5 remaining months is $2500 taxable incomr. Assuming your marginal rate is 25% (wild ass guess), that increases your taxes about $625. Your tax credit is now worth that much more.

rdovale | 17. Juli 2017

That's exactly what it is!

rdovale | 17. Juli 2017

Of course if delivery is late and end up getting beginning of year it won’t be issue getting all $7500 the following tax season.

reed_lewis | 18. Juli 2017

I submit that having the car delivered in Jan would be preferable because you could change your income habits to make sure you have the required tax liability to get the full amount of the credit.

rdovale | 18. Juli 2017

Yeah, although getting my M3 now would be awesome, that would be the best scenario. I have a feeling it won't be until then anyway or even later. I reserved it during the unveiling just before Elon said we have 143,000 reservations.

Newstvguy | 11. September 2018

Just checked, my line 47 on the 1040 for last year was under $1k. So this incentive is less of a perk.

reed_lewis | 11. September 2018

@Newstvguy - You obviously do not have very much earned income then. The $7500 tax credit is off of earned income.

Xerogas | 11. September 2018

@Newstvguy: "Just checked, my line 47 on the 1040 for last year was under $1k. So this incentive is less of a perk."
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If the reason that number is low is because you are retired, there is a way to “generate” more tax liability by converting traditional IRA to Roth.

Newstvguy | 11. September 2018

Thanks. I wish I was retired. LOL. I'm guessing it's low based on other deductions for rental property. I'm guessing that conversion would still help, however, that also increases my SC taxes, I'm afraid.

stevenmaifert | 11. September 2018

@Newstvguy - It's worth looking into. You might find that the $$$ you save on Federal taxes with an IRA conversion or withdrawal offset by the EV tax credit will more than pay for the additional state taxes you would owe. That was the case for me when in 2012 I purchased both my MS and a Leaf and had to come up with creative ways to generate $15K in tax liability.

Newstvguy | 12. September 2018

Thanks! Good to know, Steven. Do you know if the IRA conversion, or IRA withdrawal needs to be done within 2018, or can it be done by April 15th, of 2019, for the 2018 EV credit to be utilized?

reed_lewis | 12. September 2018

As long as it affects the tax year you are claiming the credit in, it works. So Yes!

stevenmaifert | 12. September 2018

@Newstvguy - According to IRS Pub. 590-A, "You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you hadn’t converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA." So it looks like you would have to do it in 2018. I don't know if the tax reform legislation of 2017 changed that as the IRS is still working on implementation guidelines for the 2018 tax year.

Newstvguy | 12. September 2018

Thanks, Reed and Steven. Looks like I need to research for sure, whether the conversion needs to be done in 2018, of if it can be done while I'm doing my taxes in January 2019.