Multiple tax credits, husband and wife tax credits.

[Carsinmyblood]

When I told a friend that my wife and I were buying and looking forward to being eligible for the tax credit X2, he said, "are you sure you can claim 2 in the same year?" .......I'd always thought so....I had better look it up.

Here's the IRS tax form. It has a place for each of 2 vehicles. So, now I know. I hope the title is common-language enough to be searchable for the next one stumbling in the dark.

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[Mopey]

Here's the IRS tax form. It has a place for each of 2 vehicles. So, now I know. I hope the title is common-language enough to be searchable for the next one stumbling in the dark.

Actually, if you buy 10 credit eligible EVs in a calendar year and you owe at least $75,000 in IRS tax, you can claim the credit on 10 vehicles in a single year - but you may want to consider talking to an addiction counselor.

 

[jojomontag]

When I told a friend that my wife and I were buying and looking forward to being eligible for the tax credit X2, he said, "are you sure you can claim 2 in the same year?" .......I'd always thought so....I had better look it up.

Here's the IRS tax form. It has a place for each of 2 vehicles. So, now I know. I hope the title is common-language enough to be searchable for the next one stumbling in the dark.

Won't do you any good unless you owe at least $15000 in taxes. It's a non-refundable tax credit.

 

[Carsinmyblood]

Won't do you any good unless you owe at least $15000 in taxes. It's a non-redundable tax credit.

...UP TO $15,000 in federal taxes.

 

[jojomontag]

...UP TO $15,000 in federal taxes.

I'm simply saying that you won't fully benefit from the tax credit on both vehicles if you don't owe at least $15k in taxes to negate all $15k. If you owe less ("up to"), you will miss out on the difference. For example, if you owe just $10k, you leave a $5K credit on the table.

I won't owe $7500 in taxes, so I won't fully benefit from the credit. Sure, all I do owe will be negated, but I will likely leave about $1-2k on the table. It'll be nice to get back all of the taxes I will pay (perhaps $4k total).

It's a bit of false advertising (technically misleading, not false, but let's call it like it feels) on EV manufacturers' part, subtracting the tax credit from the vehicle price. It makes it seem like you will get all $7500 in your pocket. It's much more complicated.

 

[Mickey the T]

I won't owe $7500 in taxes, so I won't fully benefit from the credit. Sure, all I do owe will be negated, but I will likely leave about $1-2k on the table. It'll be nice to get back all of the taxes I will pay (perhaps $4k total).

It's a bit of false advertising (technically misleading, not false, but let's call it like it feels) on EV manufacturers' part, subtracting the tax credit from the vehicle price. It makes it seem like you will get all $7500 in your pocket. It's much more complicated.

Can you do a Roth IRA conversion, or if you're over 59 1/2, have an IRA or 401(k) you can take withdrawals from? That will boost your taxable income and it will have the effect of getting $$$ out of a pre-tax investment for zero taxes. (I'm pretty sure Texas doesn't have a state income tax.) Heck, even if you are under 59 1/2 and had to pay the 10% penalty for early withdrawal, you'd still come out ahead.

 

[Aquar33f]

Can you do a Roth IRA conversion, or if you're over 59 1/2, have an IRA or 401(k) you can take withdrawals from? That will boost your taxable income and it will have the effect of getting $$$ out of a pre-tax investment for zero taxes. (I'm pretty sure Texas doesn't have a state income tax.) Heck, even if you are under 59 1/2 and had to pay the 10% penalty for early withdrawal, you'd still come out ahead.

I’m a CPA, yes that is how it works, and rolling over 401k/IRA funds to a Roth are exactly what I’m doing to “use up” my credit (assuming I take delivery by 12/31…).

 

[ChuckA]

I’m a CPA, yes that is how it works, and rolling over 401k/IRA funds to a Roth are exactly what I’m doing to “use up” my credit (assuming I take delivery by 12/31…).

Great advice. Is April 15 the deadline for an IRA to Roth IRA conversion?

 

[RickMachE]

Great advice. Is April 15 the deadline for an IRA to Roth IRA conversion?

No. 12/31/21

 

[RickMachE]

Many people get confused on the tax credit. They confuse tax owed with tax liability.

You earn income. Your earnings have a tax liability. 1040, line 24, tax owed.

Your tax credits are taken against this number. Tax withholding is irrelevant here.

People confuse taxes they have to pay (tax owed minus withholding) as taxed owed. No. Line 37 is what you owe after tax credits, withholding, and want other tax payments.

Examples:

A) Don earns X dollars a year. He pays $5,000 to the IRS via withholding. Don's tax owed, line 24, is $6,000. Without a tax credit, Don would owe the IRS $1,000 ($6,000 - $5,000). But Don bought a Mach-E, and has a $7,500 tax credit coming. $6,000 tax owed - $7,500 tax credit = zero, since the credit is "non-refundable". Don will get back the $5,000 he paid in tax withholding, but lose $1,500 of the $7,500 tax credit.

B) Mary earns X dollars a year, and pays $6,000 to the IRS via withholding. Mary's tax owed, line 24, is $13,000 (so in reality, Mary UNDERWITHHELD taxes and would have a penalty owed to the IRS plus $7,000 in taxes owed. But Mary bought a Mach-E. So $13,000 - $7,500 = $5,500 - $6,000 = $500 that Mary will get back from the IRS, and she will not owe a penalty.

 

[Draconfier]

Actually, if you buy 10 credit eligible EVs in a calendar year and you owe at least $75,000 in IRS tax, you can claim the credit on 10 vehicles in a single year - but you may want to consider talking to an addiction counselor.

Hope you take possession prior to 12-31-21 or they don't pass the newly revised House Bill I've posted the link to the other thread here.
https://www.macheforum.com/site/thr...-incentives-for-evs-from-house-of-reps.11093/
Under the new bill you can only claim 1 vehicle per fiscal year on your taxes. Seen here.

 

[Mach1E]

Hope you take possession prior to 12-31-21 or they don't pass the newly revised House Bill I've posted the link to the other thread here.
https://www.macheforum.com/site/thr...-incentives-for-evs-from-house-of-reps.11093/
Under the new bill you can only claim 1 vehicle per fiscal year on your taxes. Seen here.

Does the old law get killed though?

If not, until Ford hits the 200,000 mark and a couple quarters go by, you’re good.

Not that anyone could likely buy 10 BEVs and convince the IRS they aren’t for resale anyways.

 

[Draconfier]

Does the old law get killed though?

If not, until Ford hits the 200,000 mark and a couple quarters go by, you’re good.

Not that anyone could likely buy 10 BEVs and convince the IRS they aren’t for resale anyways.

No, the old bill dies either 12-31-21 or after the bill is ratified in both the House and the Senate whichever happens last.

 

[orangelines]

Many people get confused on the tax credit. They confuse tax owed with tax liability.

You earn income. Your earnings have a tax liability. 1040, line 24, tax owed.

Your tax credits are taken against this number. Tax withholding is irrelevant here.

People confuse taxes they have to pay (tax owed minus withholding) as taxed owed. No. Line 37 is what you owe after tax credits, withholding, and want other tax payments.

Examples:

A) Don earns X dollars a year. He pays $5,000 to the IRS via withholding. Don's tax owed, line 24, is $6,000. Without a tax credit, Don would owe the IRS $1,000 ($6,000 - $5,000). But Don bought a Mach-E, and has a $7,500 tax credit coming. $6,000 tax owed - $7,500 tax credit = zero, since the credit is "non-refundable". Don will get back the $5,000 he paid in tax withholding, but lose $1,500 of the $7,500 tax credit.

B) Mary earns X dollars a year, and pays $6,000 to the IRS via withholding. Mary's tax owed, line 24, is $13,000 (so in reality, Mary UNDERWITHHELD taxes and would have a penalty owed to the IRS plus $7,000 in taxes owed. But Mary bought a Mach-E. So $13,000 - $7,500 = $5,500 - $6,000 = $500 that Mary will get back from the IRS, and she will not owe a penalty.

Thanks for clarifying this. I was notified that my Mach-E will be delivered within 2021 and was about to scramble to get my employer to stop withholding my income tax for the remaining paychecks of this year, just so that I could generate enough tax to owe.
Makes much more sense that I will just get a refund from my withheld income so long as it exceeds $7500 in liability after deductions.

 

[Mach1E]

Thanks for clarifying this. I was notified that my Mach-E will be delivered within 2021 and was about to scramble to get my employer to stop withholding my income tax for the remaining paychecks of this year, just so that I could generate enough tax to owe.
Makes much more sense that I will just get a refund from my withheld income so long as it exceeds $7500 in liability after deductions.

Nope.

Withholding will not affect the credit nor what you “owe.”

You could withhold 0% (self employed) or 100% of your paycheck and it would have zero effect on your tax liability and the tax credit (except that you may pay a penalty at tax time if you underpay too much).

Re-read this line from the person you quoted, “Tax withholding is irrelevant here.”

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