Did I read this right!? (regarding $7500 Federal Credit)

Doesn't matter if you're owed a refund. What matters is what your tax liability is (ignoring what you've already paid).

To expand on the example. If Richard owed $375 in taxes, and he received a credit of $500, and had already paid $425 in taxes he would receive back $425 (i.e. the $375 in taxes is wiped out by the $500 credit). The credit itself is not refundable but whatever Richard had already paid in taxes is refundable.

There is typically a lot of confusion around this because the tax credit is called a non-refundable credit and people (like yourself) think that means they lose out if they already paid taxes and are due a refund.

breser's got it. If you've paid at least $7500 in taxes this year, you'll get the full value of the credit no matter what your credit/bill would have been come April otherwise. What you've paid through witholding or estimated payments is irrelevant, only the dollar amount of your total tax bill for the year matters. The distinction is important: you may usually get an end-of-tax-year refund, but that doesn't mean you paid no taxes. It just means you overpaid your taxes.

Given the price of the vehicle, it's highly likely the vast majority of buyers qualify for the entire credit.

R²B said:

So if I understand this right say.....

1) Based on my income I owe $20k in taxes (which I pay throughout the year on each paycheck)
2) My itemized deductions brings my taxable income down to the point I should have only paid $12k in taxes (netting me a $8k refund)
3) This EV credit further reduces my tax liability from $12k down to $4.5k (which now nets me a $15.5k return)

I have this right?

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Correct.

R²B said:

Thanks guys. Mini panic attack averted.

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If if the full credit isn't used in one year, doesn't it roll over up to the third year?

I wish I got the full tax credit. I just filed my taxes 20 minutes ago and I am only getting a $5K refund and because of this tax credit my Oregon taxes went up and I owe $400. So I got shafted multiple times.

Also, if you pay even one penny of AMT (Alternative Minimum Tax), the EV credit vanishes.

So... consider moving things around, like contributions to IRAs or similar (which can still be done from 1/1 through tax day for the prior year)... or similar.

Danal said:

Also, if you pay even one penny of AMT (Alternative Minimum Tax), the EV credit vanishes.

So... consider moving things around, like contributions to IRAs or similar (which can still be done from 1/1 through tax day for the prior year)... or similar.

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No, the EV credit is not subject to AMT...but it can cause other tax credits that are subject to AMT to trigger sooner.

Nosken said:

If if the full credit isn't used in one year, doesn't it roll over up to the third year?

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Some credits do roll over (e.g. foreign tax credit), this one does not.

Danal said:

Also, if you pay even one penny of AMT (Alternative Minimum Tax), the EV credit vanishes.

So... consider moving things around, like contributions to IRAs or similar (which can still be done from 1/1 through tax day for the prior year)... or similar.

Click to expand...

No. It is not subject to AMT. However it should be noted that people at the IRS have confused it with an older credit that was subject to AMT and caused difficulty for people claiming credits.

ItsNotAboutTheMoney said:

No. It is not subject to AMT. However it should be noted that people at the IRS have confused it with an older credit that was subject to AMT and caused difficulty for people claiming credits.

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Just wanted to mention that the few who have said this are correct. Paid a bit of AMT last year. Got full credit.

Well that AMT update relieves a lot of worry for me. I purchased a Leaf a couple of years back and claimed the credit, no issues. However, as I was finalizing the tax return in Turbo Tax, the return was flipping in/out of having to pay AMT, and TT for that year (tax year 2012, I think, could be mis-remembering) was adding/removing the $7500 credit. The final return had no AMT, and therefore had the $7500 credit, so I did not research it any further.

The following year, I paid a bit of AMT. Felt like I'd dodged a bullet.

As you can see from my sig, I have a P85D on order, will be delivered in 2015 tax year. I was a bit concerned about AMT vs. refund. Now, no worries.

THANK YOU all.

It might be worth mentioning that even though the fed credit is only good for the year of purchase, some state credits can roll until it's used, or up to 5 years.....varies by state.

Hmmm... this piqued my interest and I've been researching on the IRS site. Prior tax year forms and instructions for 2012 and 2013. I can find nothing that would have caused the AMT to remove the EV credit. I believe this was a Turbo Tax bug, back when I encountered it in 2012.


So... to be very clear: I stand corrected. AMT has absolutely no interaction with EV credit in any way. The EV credit is applied to your total tax owed, no matter 'how that tax got there'.

Danal
:smile:

For the AMT/TMT the IRS still screws this up for some people and incorrectly reduces the credit. I contested it when it happened to me and got the full credit. Myself and others compiled this document to help out anyone that this happens to.
EV Tax Credit and AMT/TMT - Google Docs

For 2013, I claimed the $7500 EV tax credit as well as the EVSE tax credit for installing a HPWC. Because I was subject to AMT the EVSE tax credit was wiped out, but I still got the full $7500 EV tax credit. I used TurboTax.

If anyone is interested, there are huge threads over on the Leaf forum. Turbotax has had issues in the past. The IRS has had issues in the past. Hopefully for 2014, everyone is on board.

Imagine the angst with a Leaf, not getting the credit worth 25% of the original purchase price. Plenty of people waited months for their refunds because the IRS didn't seem to understand their own rule.

The whole thing got me off Turbotax for good. And as a general recommendation to strangers, if you can afford a Tesla, you should afford an accountant. I learned my lesson (and it was far more than just the EV credit issue). No one should be getting advice on a forum over something involving the government and $7500 - although all the advice here is correct to my knowledge.