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Tax Credit Liability

Tax Credit Liability

I Pre Ordered mine on the 1st of this month so its fair to say I will be missing out on the full $7,500. I may be getting in during the final phase out period which to my understanding will be about $1,500 or so.

I do wonder, because every year I have done my taxes I never have a liability and always receive a refund, how can I make a tax break like this work in my benefit? Claim a few dependents in 2018? I want to be able to take advantage of the full credit and don't want to waste it. (Assuming I even make it in time)

Interested to hear what you all think or how you plan on taking advantage of the full $7,500.

ölbrenner | 13 ottobre 2017

Lost me at "I never have a liability and always receive a refund". I take it what was meant is you over withhold on your tax liability, and therefore receive a refund (best rethink that strategy imo).

Personally I would not start under witholding and rely on the tax credit to make up for it later. With the current administration, imo there's a chance it could go away, and then you are stuck with a big tax liability (and penalties) for being under withheld.

I will pull $7500 out of savings to put down towards the car, if and when the $7500 refund check comes put it back into savings.

As usual with tax talk ymmv consult your tax advisor etc.

Magic 8 Ball | 13 ottobre 2017

It absolutely makes no sense to give your money to the government as an interest free loan to them. Take home as much money as you can and put it in an interest bearing investment and pay what you owe when it is due to be paid.

chihuahua31 | 13 ottobre 2017

@blunt2544 It's not 100% clear to me if this is what you are saying but don't confuse liability with owning money versus getting a refund at tax time. They are not one and the same. If you have no liability it means you owe nothing to the government in taxes for the year. It means you get 100% of your withholdings for the year returned to you + any possible credits. Getting a refund every year does not mean you have 0 liability, it only means that you withheld more than you needed to. Regarding your plans to take advantage of the credit, if your tax liability is truly 0, you need to increase your liability to the government. This is not something people generally try to do, and may not be that easy. The most obvious way is to make more income during the year. Adding dependents will do the opposite of what you want to do. You would need to get rid of dependents. Do you have a mortgage? You could refinance to a lower interest rate (this will reduce your itemized deductions). Another idea that I am not endorsing in any way: give less money to charities.

Rocky_H | 13 ottobre 2017

@blunt2544, I think you're misunderstanding tax terminology. Let me give some example numbers.

Let's say you made $100K. You had a tax liability of $20K. But during the year, you have already had $30K withheld in taxes from your paychecks. You will then get a $10K refund when you file your taxes.

See how that works? You did have tax liability and still get a refund because you had already given more than was owed. So in this example, you would have $20K in total tax liability. That is more than the $7,500, so that will be taken off of the amount you owe, and your refund will be $7,500 higher.

Yodrak. | 13 ottobre 2017

What Rocky_H said. Don't look at line 75 (or 78) on your Form 1040, look at line 63. If line 63 is $7,500 or less that line will go to $0. If line 63 is more than $7,500 it will be reduced by $7,500. In either case your refund or amount owed will change accordingly.

Further, don't wait until you file your next tax return to take advantage of the tax credit. Adjust your withholding amount and start getting your money right away with each paycheck.

stevenmaifert | 13 ottobre 2017

The Qualified Plug-in Electric Drive Motor Vehicle Credit is taken at Line 54(c) on Form 1040, and is part of the summation of credits shown on Line 55. If Line 55 is more than the summation of taxes on Line 47, you enter 0 on Line 56. The "Other Taxes" listed on Lines 57 though 62 cannot be offset by the Qualified Plug-in Electric Drive Motor Vehicle Credit. If there is a balance on Line 63, you still owe that even if Line 56 is 0.

jefjes | 13 ottobre 2017

Use assets that will create taxable income that you don't have withholding for during the year you take delivery. That should increase your tax liability for that year, give you more to pay down on the car, provide more choices for options, maximize the tax credit. It will take some calculating to come up with the correct amounts in each individual situation since you will need to know when the car will be delivered, how much tax credit is still remaining, and how much will adding to your present income increase your tax liability for the year it all happens, but should be a worthwhile research project while waiting for delivery.

Yodrak. | 13 ottobre 2017

stevenmaifert - thanks for that correction

WhiteModel3AWD | 13 ottobre 2017

As I understand it....

The credit is against what you paid in taxes and has nothing to do with how much of a refund you get. If you paid $1,500 in taxes during the year then you should be able to get all of that back from the credit. If you only paid $1,000 in taxes during the year then you should be able to the $1,000 back in the same tax year and $500 the following year (Assuming you have at least $500 in taxes paid the following year.)

rxlawdude | 13 ottobre 2017

Simply:
1. WHAT IS YOUR TAXABLE INCOME?
2 WHAT IS YOUR TAX CALCULATED FROM THAT? (NOT withholding or estimated taxes paid over the year.)

If the answer to question #2 is >$7,500, you will save $7,500.
If the answer to question #2 is <$7,500, you will have no tax liability (and get a refund of withholding or estimated tax paid over the year).
If the answer to question #2 is zero, you get no benefit of the credit. The credit cannot be carried over to the following year.

Rocky_H | 13 ottobre 2017

@rxlawdude +1 on the answers. And +1 to me too. :)

rxlawdude | 13 ottobre 2017

@Rocky, thanks for your examples, which will help visualize the rules.

SUN 2 DRV | 13 ottobre 2017

I'll add one thing... If your tax liability IS less than $7500 (or the then current tax credit) there are creative ways to increase your tax liability that year, so you can still get the benefit of the tax credit. Converting an IRA is one such idea...

But as Rocky and RX have said, the first step is to understand your actual tax liability and compare that with your available tax credit.

blunt2544 | 14 ottobre 2017

Thank you all for the very informative input. I suppose the language I used was very confusing for some. I should have stated more clearly that I do have a tax liability but instead my taxes paid are more than my liability, therefore I receive a refund.

I think the wise decision would be what a few member suggested and that is to take home all of my money from my checks. This is assumed that I will receive the EV tax credit to pay off my liability for the year. I do not make very much money so I really don't need the full $7,500 credit. I just hope I can get something form it.

Thanks again everyone, much love.

SP_H | 14 ottobre 2017

For tax credit how do we know where we're at in the bracket when it is time to order.
Will Tesla let us know if we're still in full or partial credit bracket at the time of purchase? Or do we find out after we file tax?

Thank you :)

ReD eXiLe ms us | 14 ottobre 2017

SP_H: Tesla themselves will probably not say either way until the Federal EV Tax Credits are no longer available at all. Currently that is predicted by most here to take place on/about July 1, 2019. Elon Musk has been adamant and forthcoming since 2013 that no one should expect incentives to be in place for Tesla Generation III vehicles at all. Either because: 1) Their cars sell very well so that it expires; or 2) political winds of change eliminate such benefits prematurely.

The information you seek will be publicly available on the IRS website. And pretty much every news organization on the planet will be sure to point out that Tesla was the 'FIRST AUTOMOBILE MANUFACURER IN AMERICA TO SELL 200,000 ELIGIBLE EVs'. Some will cover it as a milestone, others will consider it a disadvantage. But it will be covered nonetheless.

SP_H | 14 ottobre 2017

Thank you Red :)

Rocky_H | 16 ottobre 2017

@SP_H, Quote: "For tax credit how do we know where we're at in the bracket when it is time to order.
Will Tesla let us know if we're still in full or partial credit bracket at the time of purchase? Or do we find out after we file tax?"

Here's why it's set up the way that it is. First off, the rule: it stays at the full level during the rest of the quarter in which they get to 200K delivered, plus one more quarter.

That is because the car makers do their accounting at the end of each quarter to do their financials, tally up their balance sheets, report earnings, and report how many cars they shipped. It is at that time that they will know for sure whether they crossed that 200K car mark. But it is also at that moment that they are a few weeks into the next quarter. So to make sure to lock it down to specific dates, they need to include the quarter they just finished, and they one they are partially into. See?

So at some point, after a quarter has just finished, Tesla will give their quarterly announcement of how many cars they shipped, and will add to that, "And that puts us past the 200,000 U.S. cars delivered for the tax credit calculation"