Tax credit discussions

[HBGuy]

Keep in mind the tax credit is applicable to taxes owed/payable, and isn't reimbursable. If you can't use 100% of it, you'll lose whatever you don't use. I'm not aware of any limitation on the number of credits that can be claimed, just the requirement that it can only offset taxes payable.

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[Eosin]

Keep in mind the tax credit is applicable to taxes owed/payable, and isn't reimbursable. If you can't use 100% of it, you'll lose whatever you don't use. I'm not aware of any limitation on the number of credits that can be claimed, just the requirement that it can only offset taxes payable.

This is probably an issue for a lot of business owners, people with 1099 employment, and retirees, but I can't imagine not getting the 7500 credit as somebody with full time w2 employment.

Most everybody with w2 employment pays at least 7500 in federal income taxes when the total deducted from each paycheck throughout the year is added up.

I got the full 7500 when I bought a Pacifica Hybrid last Fall. I'm looking forward to collecting it again for my Mach E purchase when I file 2021 taxes.

I would really like another EV for my family, maybe a Rivian, and plan to take the full credit again on my 2022 taxes.

 

[HuntingPudel]

After looking at last year's taxes, I think I'm going to have to suspend my 401k contributions for the rest of the year to increase my tax burden. LOL

OTOH, with my company's matching program, that is probably not be a wise thing to do.

 

[ddlt]

Listening to Joe tonight we all might have a need for $7500 tax credit

 

[Eosin]

I could be missing something, and you may be right. But help me understand that math.

67,000 minus the standard deduction of 12,400 leaves an adjusted gross income of 54,600.

An individual with an AGI of 54,600 would pay 22% in federal income tax. That works out to 12,012 owed in federal taxes... Far more than 7,500.

Anybody making 41,000 and taking the standard deduction would owe enough taxes to benefit from the full 7,500 credit when I do the math.

I suspect not many people making less than that amount of money are buying this car, but I'm sure there are more than a few. To each their own.

 

[Eosin]

Thanks for that suggestion. Tax calculators are helpful here. It shows a way different income tax owed than what I got by simply multiplying a given income by the marginal tax rate for that income tax bracket. So as you had said, an individual would need to have an income in the mid to upper 60k range to qualify. That's still probably going to apply to most people buying this car brand new... At least I hope. I certainly wouldn't spend more than my yearly income on a car.

 

[HuntingPudel]

I don't see how Roth contributions would increase my tax burden. I guess I just need a raise in order to increase my tax burden.

 

[mburtsvt]

End of the day- TALK WITH A TAX PROFESSIONAL! Don't leave any of the $7500 on the table. Do it soon in case you need to make adjustment to your tax situation.

 

[FCCinAZ]

Better plan is to convert 401k contributions to a Roth IRA and have the tax credit pay the tax burden. Then when you make withdrawals from the Roth when taxes are sky high, you get that money tax free.

 

[HuntingPudel]

The problem with the Roth solution (for me) is that my company does not offer one. Additionally, because of this there is no company matching on such contributions which is an overall negative impact. In any event, were I to start a Roth program I would still need to suspend my company 401k contributions. So as I wrote earlier, In order to take full advantage of the tax credit I would need a raise. ?

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