mach-e, tax credit eligibility

[kkgg]

Hello Forum,

I have Ordered mach-e premium, ext range, in Oct/2021
Scheduled for production for last week of Aug/2022

If I take the delivery of the car in Oct/2022, what is the probability I will be still eligible for full tax credit($7500)
Its a deal breaker for me, if my mach-e don't make the 200k manufacturer tax credit cap

I checked these websites
https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit
https://www.fueleconomy.gov/feg/taxevb.shtml

they show mach-e is eligible as of now, but I think it is not super accurate,
moreover f150 lightning deliveries started too..

your 2 cents please..

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[shereth]

Ford as of yet has not crossed the 200,000 threshold. Last I heard that's expected to happen sometime next quarter, in Q3.

If that happens, that means anyone who finalizes their purchase by the end of this year will qualify for the full $7500. So you should be fine.

 

[devmach-e]

Also keep in mind that it is a phaseout, not a sudden end. If Ford hits 200K qualifying vehicles sold next quarter (Q3), the full value of the credit is still available for that quarter (Q3) *and* the next quarter (Q4). On January 1st, 2023, the credit is cut in half to $3750 for the next two quarters (Q1 and Q2 of 2023), and then gets cut in half again to $1875 for 2 more quarters, and then after that, it is done.

One thing to keep in mind that is that you must have a tax liability of at least $7500 to claim the full credit. Tax liability is what the government thinks it should've gotten from you over the course of the year (usually through payroll deductions). This is separate from whether you get money back each year, or have to pay each year. If you get money back each year, it means that you sent the government more money than you should have. If you owe money, it means you didn't have enough withheld from each paycheck.

 

[kkgg]

Also keep in mind that it is a phaseout, not a sudden end. If Ford hits 200K qualifying vehicles sold next quarter (Q3), the full value of the credit is still available for that quarter (Q3) *and* the next quarter (Q4). On January 1st, 2023, the credit is cut in half to $3750 for the next two quarters (Q1 and Q2 of 2023), and then gets cut in half again to $1875 for 2 more quarters, and then after that, it is done.

One thing to keep in mind that is that you must have a tax liability of at least $7500 to claim the full credit. Tax liability is what the government thinks it should've gotten from you over the course of the year (usually through payroll deductions). This is separate from whether you get money back each year, or have to pay each year. If you get money back each year, it means that you sent the government more money than you should have. If you owe money, it means you didn't have enough withheld from each paycheck.

Thanks for the information. And yes I had my w2 adjusted at the beginning of this year so that I owe more then 7500 tax this year

 

[Maquis]

Thanks for the information. And yes I had my w2 adjusted at the beginning of this year so that I owe more then 7500 tax this year

How do you adjust a W2? That’s a statement of your income and withholding.
If you mean you changed your W4 to affect withholding, that has zero effect on your tax liability and eligibility for the credit.

 

[Orangefirefish]

How do you adjust a W2? That’s a statement of your income and withholding.
If you mean you changed your W4 to affect withholding, that has zero effect on your tax liability and eligibility for the credit.

“Hey boss, so I’m going to need you to adjust my W-2 so I can pay more taxes to qualify for the full EV credit. I’m thinking, maybe a 20K raise will do it?”

 

[RickMachE]

Thanks for the information. And yes I had my w2 adjusted at the beginning of this year so that I owe more then 7500 tax this year

You should consult a tax professional, because your understanding of the tax credit is incorrect. Adjusting your withholding has zero effect on your eligibility for the tax credit. But what you did would have likely made you eligible for an underpayment penalty, which the tax credit may now prevent.

 

[sgriffin130]

Yes. It is your net tax liability(obligation). In other words, Gross Income-Deductions=tax liability according to the tax bracketing for that particular year and your filing status. It has nothing to do with how much you have withheld. If your tax liability is greater than $7500 you will get to use the whole credit; if it is less you will only be able to use the amount that is equal to your liability. People often get excited when they get huge refunds in the spring, but all that means is you gave the Federal Government a tax free loan. Think about that if you are paying interest on credit card balances. If people were more disciplined they would determine what they will owe for the year(pretty easy to determine for most people), have that amount deducted over the course of the year and invest the difference.

 

[generaltso]

Thanks for the information. And yes I had my w2 adjusted at the beginning of this year so that I owe more then 7500 tax this year

Oh dear.

 

[ChuckA]

How do you adjust a W2? That’s a statement of your income and withholding.
If you mean you changed your W4 to affect withholding, that has zero effect on your tax liability and eligibility for the credit.

Hopefully by doing IRA conversion to a Roth IRA. Agree, W4 change does nothing.

Only way to adjust W2 is create more taxable income.

 

[Maquis]

Hopefully by doing IRA conversion to a Roth IRA. Agree, W4 change does nothing.

Only way to adjust W2 is create more taxable income.

That will “adjust” your tax witholding and the numbers on the W2 will change as a result. There is no way to legally adjust a W2 directly.

 

[devmach-e]

You should consult a tax professional, because your understanding of the tax credit is incorrect. Adjusting your withholding has zero effect on your eligibility for the tax credit. But what you did would have likely made you eligible for an underpayment penalty, which the tax credit may now prevent.

I’ve had multiple tax years where I owed significant amounts and never been subject to an underpayment penalty. Including an amount that was well over the $7500 tax credit amount. Most of my, and my wife’s, is from regular W2 jobs, be we both do freelance work, so that tends to mess with estimating withholding from year to year.

 

[RickMachE]

I’ve had multiple tax years where I owed significant amounts and never been subject to an underpayment penalty. Including an amount that was well over the $7500 tax credit amount. Most of my, and my wife’s, is from regular W2 jobs, be we both do freelance work, so that tends to mess with estimating withholding from year to year.

If one cuts their withholding without using the process specified, and then didn't have the tax credit, they would likely have a penalty. However, if you pay equal to last year's tax through withholding and estimating, then you escape a penalty.

Freelancers and self employed people do quarterly estimating to prevent a penalty.

 

[devmach-e]

If one cuts their withholding without using the process specified, and then didn't have the tax credit, they would likely have a penalty. However, if you pay equal to last year's tax through withholding and estimating, then you escape a penalty.

Freelancers and self employed people do quarterly estimating to prevent a penalty.

i’m guessIng that’s what has made us avoid the penalties in the past, despite not doing quarterly payments for the freelance work we have done In the past. Also helps that we usually get moderate refunds.

 

[RonOinAZ]

The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn't pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.
https://www.irs.gov/taxtopics/tc306

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