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Tax Credit Help

JCHLi

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If you have a tax deferred retirement account, like a 401k or IRA and do not have enough tax liability in the current year to claim the full benefit you can do a Roth conversation. You'll end up "owing" the tax on the amount converted which can give you enough liability to get your full refunded tax credit. By doing the conversion, you'll get to claim the full credit (good) and benefit from the different tax advantages of the Roth later on.
 

dbsb3233

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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.



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.)
Yeah, I lumped those together but I should have separated them to be more clear. And as with ALL tax situations, it always come with an "it depends on your situation".

Similarly with trying to reduce withholding for 2020, as it's a crapshoot whether anyone will get their Mach-e in 2020. Of course, that's just a cashflow thing. Doesn't affect getting the full credit or not, which it what I was addressing.
 

Mickey the T

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If you have a tax deferred retirement account, like a 401k or IRA and do not have enough tax liability in the current year to claim the full benefit you can do a Roth conversation. You'll end up "owing" the tax on the amount converted which can give you enough liability to get your full refunded tax credit. By doing the conversion, you'll get to claim the full credit (good) and benefit from the different tax advantages of the Roth later on.
Completely agree on this if you have the opportunity to do it. For the dollars at stake, it's worth checking with a tax pro on how to max this out.
 

ChasingCoral

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Yeah, I lumped those together but I should have separated them to be more clear. And as with ALL tax situations, it always come with an "it depends on your situation".

Similarly with trying to reduce withholding for 2020, as it's a crapshoot whether anyone will get their Mach-e in 2020. Of course, that's just a cashflow thing. Doesn't affect getting the full credit or not, which it what I was addressing.
If you are confident you will not receive your Mach E until 2021, reducing withholdings could be a good move. Remember that the IRS will penalize you for significantly under-withholding. That could be a problem if you make major changes now and counting on a 2020 car delivery and then delivery is delayed to 2021.
 



 









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