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Tax Credit for ppl who usually get Refunds??

Tax Credit for ppl who usually get Refunds??

I have talked to several different people, Tesla, Irs website, tax person, other websites, friends and family. Most all educated people agree the 7500 federal tax credit will only help people who OWE in taxes. For me I only make 30k a year and I usually get a small refund each year. My wife on the other hand makes near 60k and we have a 6 month old baby. So from everything I gather I will GET NOTHING!!!!!!!!!! not even a dollar. The 7500 tax credit is kind of a scam and its over played WAY to much. How many people actually owe 7500 each year that's crazy unless you own a biz or something. I want a serious no back and forth answer from both someone how used the 7500 tax credit and whether they owed taxes that year anyway and it either lowered the owed taxes or covered them all together! ALSO I want to hear from someone who bought and usually gets a refund back every year and if they have tried to used the tax credit and what happened? Please help. I live in small town in Montana and only make 30k a year so this is a HUGE DEAL to me!! Or if their are any work arounds to make this work. I was thinking claim the highest amount of deductions so I have to owe, but then what if by the time I get my m3 which by the way I ordered before unveil live in Montana no prior ownership doesn't help me anymore?? PLEASE HELP

SUN 2 DRV | 12/12/2016

Purdy: You're confusing your tax LIABILITY with your tax REFUND. The $7500 tax credit reduces your tax LIABILITY, it doesn't depend on whether you get a refund or not.

What is the total amount of federal income tax you and your wife are liable for to the IRS each year? (Don't subtract any amounts your employers withhold for you.) What's your tax liability before you pay the IRS even one penny? THAT's the amount that will be reduced by $7,500. And it can result in a bigger refund IF you've had more than that result withheld.

Additionally there are beneficial ways to increase your tax liability so that you can take advantage of the tax credit in the year that you earn it (ie place your EV into service). Converting an IRA to a Roth IRA will generate a future tax advantage and also a tax liability in the current year that can be paid for with your EV tax credit.

Bottom line, yes there are requirements to take advantage of the $7500 tax credit, but there are also creative ways for you to qualify. Consult a professional...

SCCRENDO | 12/12/2016

It's pretty straightforward. If you owe more than $7500 in taxes (what you have paid is immaterial) you get $7500 off your federal taxes. If your total tax bill after deductions is less than $7500 you will not get the full $7500 only the total amount of Tax you were meant to pay. It does not matter how much tax you actually paid in the year so changing deductions won't help. It's the total amount of tax you would owe that year that matters. So if you get the car in 2018 your tax bill needs to be greater than $7500 that year

Life sucks. But the richer you are the more you benefit. Don't expect anything better under Trump. The tax credit could also have gone away by the time you get your Model 3. Also your state may have a credit. In California it is a rebate that you get back irregardless of taxes paid but the credit decreases the more you earn.

Hope this helps

https://www.irs.com/articles/tax-credits-vs-tax-deductions

Bighorn | 12/12/2016

Simmer down--don't get mad before you get better informed. As S2D points out, you are very mistaken about what a refund represents vs tax liability. I assume you file jointly, in which case I imagine your effective tax rate is more than 8.3%. i.e.7500/90000. In that case, expect your refund to be $7500 more that to which you are accustomed.

SCCRENDO | 12/12/2016

@bighorn. Depends other deductions such as mortgage. I guess if he usually gets refunds he likely has more than a $7500 tax bill.

SUN 2 DRV | 12/12/2016

Purdy: Changing your deductions doesn't affect your tax liability. Deductions only change the witholding and thus your refund. People who have modeled this claim that a family who earns $75k or more should be able to take advantage of the $7500 tax credit. So I think you should be in the right ball park to get some significant advantage from the tax credit.

purdy007boy | 12/12/2016

serious you think they will give me 7500 on top of my usual small credit after filing? That would be amazing!!! I would option out my m3 much better if I was guaranteed that

Bighorn | 12/12/2016

@SCCR
Two things--he likely doesn't itemize his mortgage interest if it doesn't exceed the standard deduction and Montana has no sales tax, so that increases his tax burden compared to states that do.

@purdy
Get out an old 1040 and see what your tax was before withholding and estimated payments were applied.

Bighorn | 12/12/2016

@purdy
Where in MT? I know quite a few owners, mostly near Bozeman.

Bighorn | 12/12/2016

@SCCR
MT actually has a pretty aggressive income tax table, so the sales tax issue becomes moot. More pertinent to the OP is the number of dependents as far as deductions go.

SCCRENDO | 12/12/2016

Looks like all he has is a 6 monther

patrick40363 | 12/12/2016

And you are just figuring this out now?

purdy007boy | 12/12/2016

Thank you EVERYONE for your comments!! I live in super tiny but one of the oldest towns in Montana Stevensville I have never been in a Tesla but I do know 2 people near by that own 1. I picked my doctor cause he owns 1 and said he should give me ride some day. but I wont hold my breath on that one. Yes just a little baby girl just turned 7 months and married for since june 27 2015. I need to pull out our joint taxes we did last year but no child on it unlike this year. I do claim 3 as duductions. Yes Montana doesn't have sales tax. No I think we just take standard deduction. I've been interested in itemizing but not sure if it would benefit us.

Jeff Hudson | 12/12/2016

BTW, if you intend to create a tax liability by converting a Traditional IRA to a Roth IRA make sure you make the conversion in the same calendar year you buy your Tesla.

SO | 12/12/2016

Purdy - there is a possibility that you won't get the 7,500 because by the time you could get your vehicle, the tax rebate may not be available.

Reasons:
1. Trump may end it.
2. Model S/X owners get first dibs regardless of when you ordered. (Not sure how true this is...but I have heard it.)
3. People living by close to the factory in California may get their M3 sooner than out of state people because Tesla wants to fix any issues quickly. (Again, only heard this and it may only pertain to the first several thousand sold.)
4. Tesla may hit their 200,000 vehicles sold in US and after that, the rebate is reduced significantly and eventually phased out.

I wouldn't buy this car if the rebate is make or break for your decision. You may want to consider a different vehicle or buy used.

Also congrats on your child. None of my business but kids are expensive and only become more so over time. I don't know that I would consider a new Model 3 at this time given your situation. But that's just me I guess.

And some more advice. If you decide you will not buy one, do yourself a favor and do NOT go for a ride in one. It will only make it hurt more that you don't get it.

SUN 2 DRV | 12/12/2016

Soudman is not wrong, but his glass certainly IS half empty. :-)

SCCRENDO | 12/12/2016

@Soudman. He will know closer to the time whether he will get the rebate and can make his decision then.The base model will be a $35000 car plus sales tax minus $7500 minus state rebate so if he needs a new car this could turn out to be a real economic choice as compared to the competitors. He will also save on gasoline.

Bighorn | 12/12/2016

@purdy
My wife has friends there at the Stevensville UMC and has visited there once.

brando | 12/12/2016

Trump won't end the $7500 federal tax credit. The auto industry won't allow it (that is the other 99.5% of the auto market).

SO | 12/12/2016

@sun - "Soudman is not wrong, but his glass certainly IS half empty. :-)"

Maybe I'm just having a case of the Mondays. :-)

SCCRENDO | 12/12/2016

@brando. Those in the know suggest that the tax credit is expiring anyway so I don't think it is worthwhile for them to expend much time on this. The reality is that under Hillary we may have got an extension or even an increase. Unlikely under Trump. He is a little petty as noted by his Boeing feud so I guess if Elon annoys him he may try go after him but still has to have congress on board.

brando | 18/01/2017

For a $30,000 car purchase you should probably make about $90,000/year.
Most advise about $53,000/year for a $17,000 car purchase.

Use google searches to get some guide lines.

gorkembaydar | 05/12/2018

OK, lets not confuse the "non-accountants" here please. Some of the folks are getting really technical with their responses, no need for it.

Watered down version, if you usually owe money at end of the year, this $7500 credit will net against that; and if there is anything left-over from the $7500 you will not get that back. Sorry. So yes it could be useless benefit for some.

Now, how can you maximize this credit? That depends on you and/or your spouses salary. You could prepare in advance and increase your tax Allowances at beginning of the year, so your employer takes out less tax from your paycheck all year, and come tax season you net the tax you would've had to pay against the $7500 credit. But to do this you should really know what you're doing, talk with a specialist, or if you're a bit savvy use TurboTax throughout the year to gauge your tax liability year to date and adjust the Allowances accordingly so you can fully maximize this credit.

JustSaying | 05/12/2018

You will get a refund of any excess amounts paid in over the year. if applicable convert some 401K amounts to a Roth to use up any amounts of the $7,500 tax "CREDIT"( Also if you can take money out a 401K without penalty, you can do that)

SUN 2 DRV | 05/12/2018

gorke: your explanation hinges on how others interpret the word OWE. Many (most?) people will think that OWE means how big a check they still must write in April, and that has nothing to do with whether you get the tax credit or not.

What matters is your tax LIABILITY for the whole year. That's the total amount that the federal gov't wants to collect from you (and your payroll withholdings) for the entire year. This liability is the amount that will be offset by the $7500 EV tax credit, and may result in getting you a bigger refund check or at least reducing the size of the check you must write in April.

EVRider | 05/12/2018

@gorkembaydar: If you wanted to resurrect an old thread about the tax credit, there are plenty of newer ones to choose from; this one was dead for almost 2 years before you replied to it. :-)

RJMIII | 06/12/2018

@gorkebaydar I agree with EVRidaer.

Also, your post was 100% WRONG.