I found a brand new model y performance in inventory. It’s a demo and it has around 900 miles on it so because of that it’s discounted for around 52k. The msrp it around 56. With all taxes and fees and destination I’ll be at 53k. I am getting mixed results if I qualify for the tax credit or not. Technically I am below 55k but the MSRP is still above 55 before the adjustments. What do you guys think?
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Will I qualify for the federal tax credit?
- Thread starter Tonybe93
- Start date
Im not an accountant and would recommend anyone trying to get the credit to consult one. That being said, my understanding is that the credit reduces your overall liability. You can adjust your withholdings to pour that money into the loan/your pocket earlier rather than wait until you file next year or just get it in a refund.
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ATPMSD
Active Member
There is also an income limit.
Your modified adjusted gross income (AGI) may not exceed:
Your modified adjusted gross income (AGI) may not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
ucmndd
Well-Known Member
Simple math. How much money did I earn, subtract 1040A itemized deduction or standard deduction. Look up what you owe. Subtract withholding. If it's $7500 or more tax credit reduces it.
ATPMSD
Active Member
That is not how tax credits work! You do not subtract withholdings. It is how much you earn, minus deductions to get to your AGI. You then look up you tax on the tax table. If this amount is $7,500, or more, you are good.
ucmndd
Well-Known Member
No. What you "owe" in tax liability has nothing to do with what you have withheld from your wages when it comes to tax credits. Correcting your statement above:
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Your above statement is correct if you withhold nothing. On the flip side of 1040 is what do you owe, how much was withheld in federal taxes, If what you owe is higher THEN you take the credit. If it's less, NO TAX CREDIT. Why is everyone making this so hard?. The tax credit applies if you didn't pay enough federal tax
when you calculate what you owe from the tax tables the you get the credit
On the W4 is asks how much federal tax do you want withheld from your paycheck. Percentage, # dependents. Yes AGI is also determined if you take standard deduction 25K+ for married -OR- you use 1040A and figure out medical deductions (amount above 7,5% of AGI), charity, real estate taxes. (Max 10K for each of the preceeding catergoies [thanks #45])
ucmndd
Well-Known Member
Still no. Withholding has absolutely nothing to do with whether or not you receive the tax credit and to what extent. Nothing.
An example:
You earned ~$80k in income, complete your form 1040, and your tax liability after deductions, etc. is calculated to be $8,000. This means you owe the government $8000. Now let's say you also bought an EV that was eligible for the full $7500 tax credit. Because you have at least $7500 of tax liability, the credit reduces that liability dollar for dollar, so you now owe the government $500 in taxes for the year.
Now let's say you had $4,000 in pre-payments withheld from your paycheck over the course of the year. Those credits are applied to your tax liability, meaning when you file your return you have $4000(prepayments) - $500 (tax liability) = $3500 refund.
The calculation remains the same regardless of the amount you had withheld from your check, whether it's $0 or $20,000. If you had $0 withheld, you would owe the government $500 to settle up. If you had $20,000 withheld, you would get a $19,500 refund.
One last time - the amount of pre-payments withheld from your paycheck via deductions has NOTHING to do with your eligibility for the tax credit.
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ATPMSD
Active Member
MSRP not Bill of Sale.
The MSRP is the base price plus all optional equipment. The Bill of Sale is the price you pay, which is the MSRP minus trade-in and discounts.
So how does in the second scenario the guy gets the $7500 tax credit if he's getting a 3500 refund ?
And how do you know an 80K earner pay 4K in federal taxes? Do you have the tax tables? And the lowest tax rate is 22% ; not sure if 80K is in that brcket
His numbers are simple examples in order to make it easier to understand.
for the 80k example, 8k is the tax owed. So 8k minus the 7.5k ev credit takes his tax owed down to 500. Since he already paid 4k from tax withholdings, he’ll get 3.5k back (4K minus 500).
ucmndd
Well-Known Member
Because without the $7500 tax credit he would have owed an additional $4,000 ($8,000 tax liability - $4,000 in pre-payments = $4,000 remaining to be paid to satisfy your tax liability).
These are round number examples to illustrate a point and help you understand the difference between tax liability (what you actually owe) and withholdings (pre-payments over the year to offset what you actually owe).
ATPMSD
Active Member
We have explained this to you several times. I suggest talk with your tax accountant.
I'm tired of this. Just trying to put it out there that you don't magically get $7500 no matter what your financial condition. And I already have experience with credits having owned more than 1 Prius and a Tesla.
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