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Tax Credit Help

AndyS_OSU

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Is there anyone on the forum well-versed in the EV tax credits and what someone’s tax status needs to look like to qualify for the whole thing?

I’m pretty sure I would get most if not all of it back as we have received refunds the last couple years and I’m pretty sure the taxes owed has been above the $7500 and nothing looks to have changed too much this year.

Is anyone willing/able/allowed to look at the first page of a 1040 and give their best guess as to how much of the tax credit someone would most likely receive?
 

KAustin

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Do a search in this forum for "tax" in the title? There have been a few discussions already.
 

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Is there anyone on the forum well-versed in the EV tax credits and what someone’s tax status needs to look like to qualify for the whole thing?

I’m pretty sure I would get most if not all of it back as we have received refunds the last couple years and I’m pretty sure the taxes owed has been above the $7500 and nothing looks to have changed too much this year.

Is anyone willing/able/allowed to look at the first page of a 1040 and give their best guess as to how much of the tax credit someone would most likely receive?
The $7500 US federal income tax credit is a non-refundable credit. Meaning if your total tax liability is less than $7500, you only get as much credit as your tax liability. If you total tax liability is over $7500, you get to take the full $7500 credit off of it.

Look at the TOTAL TAX line (Line 16, I think) on your 1040 from your last tax return as a gauge. If your income situation hasn't changed much from last year, that should give you a good idea what your total tax liability will be.

Note that whether you normally get a refund or not has nothing to do with it. A refund simply means you overpaid your tax liability for the year (usually from too much withholding in your paychecks). The TOTAL TAX liability is simply your total tax bill, before any payments/withholding is applied.
 

dbsb3233

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So for example, let's say (before applying the credit) your total tax (Line 16) is $9000. And you're getting a $500 refund because you paid in $9500 in paycheck withholding throughout the year. When you apply the $7500 federal tax credit, your refund will jump to $8000.
 
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AndyS_OSU

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That’s what I thought. With that and two children you really need $11,500 of tax liability. Looks like our line 16 is right around $7400 and we paid in more than that so if nothing else is too different this year we should get most if not all of the EV credit (if we get a MME by the end of the year).

Thanks!
 

macchiaz-o

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That’s what I thought. With that and two children you really need $11,500 of tax liability. Looks like our line 16 is right around $7400 and we paid in more than that so if nothing else is too different this year we should get most if not all of the EV credit (if we get a MME by the end of the year).

Thanks!
From what you wrote here, it's unclear to me whether or not you'll get a full credit.

Like Tim said, tax liability and tax credits are what you need to know to determine if you'll get the full credit.

You could pretend to redo your 2019 tax return into 2019 tax software (online or offline) and while you're doing it, pretend you bought an EV in 2019 so you can see how it would have impacted those taxes. 2020 should be similar if your situation is mostly the same.
 

Raymondjram

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I have to wait until the next Congress changes the Federal tax credit into a point-of-sale rebate because as a Territory we never pay Federal taxes. And if we did, I will never get that full credit because I pay very litle income tax since I retired in 2011. Our local tax system had a rebate for hybrid and electric vehicles up to $2,000 (I did get that rebate for my Fusion) but that ended in 2015. I hope a new admiministration will re-establish a rebate for 2022 or later, so when I do buy an electric vehicle, I can use the rebate at the point of sale or get it after.
 

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I'll be doing an estimated tax calculation right before delivery to be sure I'm maximizing the tax credit. I can't imagine not being able to use the whole credit, but you never know.

I plan on keeping the MME but I'll lease it if I can't get the full credit, then just buy out the lease at the end. I'm open to all three at this point. I'll probably go with the lowest interest rate. (hopefully, a zero percent interest is in there.)

Maybe we need to talk about bad the economy is, and how expensive the car is, so Ford throws out more incentives.

Hi Ford, love the car, but I'm sure I can afford it because my job is unstable right now.
 

dbsb3233

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I have to wait until the next Congress changes the Federal tax credit into a point-of-sale rebate because as a Territory we never pay Federal taxes.
That's highly unlikely to ever happen with the US federal tax credit for EVs. It's a non-refundable tax credit for a reason -- meaning if you don't pay US federal income taxes, you don't owe anything to get a credit off of.

But as you said, maybe your local jurisdiction may do something.
 
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AndyS_OSU

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From what you wrote here, it's unclear to me whether or not you'll get a full credit.

Like Tim said, tax liability and tax credits are what you need to know to determine if you'll get the full credit.

You could pretend to redo your 2019 tax return into 2019 tax software (online or offline) and while you're doing it, pretend you bought an EV in 2019 so you can see how it would have impacted those taxes. 2020 should be similar if your situation is mostly the same.


I think we are right on the cusp. But from everyone’s description of this (I’d ask my accountant but she’s going through chemo and radiation right now) it sounds like we should get most of it.
Line 12b TAX - $11600
Line 13b (13a -child tax credit plus schedule 3, line 7)- $4200
Line 16 Total Tax- $7400
Line 17 Tax withheld - more than $7400
 

dbsb3233

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Maybe we need to talk about bad the economy is, and how expensive the car is, so Ford throws out more incentives.
With the reports from trutolife27 about the Mach-e (supposedly) having demand commitments far exceeding the 50,000 supply, I'd be surprised if it's not excluded from any big incentives.
 

macchiaz-o

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I think we are right on the cusp. But from everyone’s description of this (I’d ask my accountant but she’s going through chemo and radiation right now) it sounds like we should get most of it.
Line 12b TAX - $11600
Line 13b (13a -child tax credit plus schedule 3, line 7)- $4200
Line 16 Total Tax- $7400
Line 17 Tax withheld - more than $7400
OK thanks, I think I'm following now. So yeah, you were close to the full $7500 if you had bought an EV last year. If your situation starts off the same this year, and you accept delivery of a Mach-E by 12/31/20, then you'd get a $7,400 credit for the vehicle while filing 2020 taxes. If you over-withheld (as you did in 2019), then you'll get an IRS refund of greater than $7400.
 

dbsb3233

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I think we are right on the cusp. But from everyone’s description of this (I’d ask my accountant but she’s going through chemo and radiation right now) it sounds like we should get most of it.
Line 12b TAX - $11600
Line 13b (13a -child tax credit plus schedule 3, line 7)- $4200
Line 16 Total Tax- $7400
Line 17 Tax withheld - more than $7400
Exactly.

And you might have a few other things you can shift around that can boost your taxable income and/or reduce your deductions (if you itemize) to push the total tax over $7500 and make use of the full credit. It really just depends on your tax situation. If you don't itemize, there may not be any options, but if you do, you could do something like delay any charitable deductions until next year, or delay IRA contributions. Or someone over 59.5yo could take an IRA withdrawal to boost taxable income.

Although in your case, $7400 is so close that it's probably not worth even messing with it. Even a raise from last year may push that total tax up to $7500. 2020 could be a goofy year for taxes though for many people if their job situation was affected by COVID.
 

RyZt

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I'm not an attorney or accountant. My belief may not be correct.

Additionally, based on your comment in another thread, I want to mention that you don't have to wait a year to receive the EV credit. Instead, you can reduce your paycheck withholding so you receive a little more every pay check. (Say, you're paid biweekly, which is 26 pay periods per year. If you reduce your withholding by $288 per paycheck, you'd be getting that $7500 throughout the year.) This way, when it comes to the filing time, you'll get a smaller refund or you may need to make a small payment. As long as the payment needed at filing time is below $1000, there's no underpayment penalty.

You can change your withholding by submitting a new W-4 to your employer.

If you don't itemize, there may not be any options, but if you do, you could do something like delay any charitable deductions until next year, or delay IRA contributions. Or someone over 59.5yo could take an IRA withdrawal to boost taxable income.
You can reduce traditional 401K and traditional IRA contributions to increase your tax liability regardless of whether you itemize. However, it may or may not be a good idea. Given the amounts you mentioned in earlier comments, I'll make two assumptions here:

* You don't max out the contributions ($19.5K 401k + 6k IRA, more if over 50).
* if applicable, you're currently contributing more than the minimum needed to take full advantage of employer match. (Don't reduce below that "minimum".)

If either assumption is wrong, don't go down this path. Assuming both are true, if you contribute a little less the year you take delivery of your EV, a little more the year before and/or the year after, the overall impact on your retirement income is a wash. (It can be slightly positive or negative, due to market fluctuation. But that's pure luck, and the odds are the same.)
 
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methorian

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I'll be doing an estimated tax calculation right before delivery to be sure I'm maximizing the tax credit. I can't imagine not being able to use the whole credit, but you never know.

I plan on keeping the MME but I'll lease it if I can't get the full credit, then just buy out the lease at the end. I'm open to all three at this point. I'll probably go with the lowest interest rate. (hopefully, a zero percent interest is in there.)

Maybe we need to talk about bad the economy is, and how expensive the car is, so Ford throws out more incentives.

Hi Ford, love the car, but I'm sure I can afford it because my job is unstable right now.
Just a heads up that there is no lease option for the Mach-E that allows Ford to claim the credit. Their lease-like option called "Ford Options" has the vehicle titled in the buyers name, so it would still be up to you to claim the credit.
 



 









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