Tax Credit Only Applicable to W-2 Tax Liability?

[dmastro]

That is the elephant in the room. Too many people are spending money to make them happy with little thought going forward. Unfortunately, "their happiness" usually ends with heartache when the collector comes a knocking.

I purchased a Premium MME because I thought the GT was too much money to spend on an EV personally. With that being said, I would have been "happier" in the GT but I restrained from that and purchased a vehicle much more aligned with my finances.

I don't have any issues with people purchasing things that make them happy, but I do take issue when I (i.e. bankruptcy and the like) end up with the people that spent their money wisely having to bail those that were "Happy" at the end of the day.

My personal belief is as such. Never purchase anything (whether a loan or cash) that you could lose if you lost your source of income going forward at least 6 months. In other words, if you can't afford to make a substantial down payment on any vehicle purchased, you best look for one that you can. There are too many salespeople that talk people into purchasing "stuff" that the person really can't afford.

And yes, I think if you make less than 275K you should be looking at the 55k vehicles or less.

Just my opinion though..................

So a person making $60,000 should buy a car for $12K or less by this ratio. Hello 2010 Ford Focus...

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[jay1122]

That is the elephant in the room. Too many people are spending money to make them happy with little thought going forward. Unfortunately, "their happiness" usually ends with heartache when the collector comes a knocking.

I purchased a Premium MME because I thought the GT was too much money to spend on an EV personally. With that being said, I would have been "happier" in the GT but I restrained from that and purchased a vehicle much more aligned with my finances.

I don't have any issues with people purchasing things that make them happy, but I do take issue when I (i.e. bankruptcy and the like) end up with the people that spent their money wisely having to bail those that were "Happy" at the end of the day.

My personal belief is as such. Never purchase anything (whether a loan or cash) that you could lose if you lost your source of income going forward at least 6 months. In other words, if you can't afford to make a substantial down payment on any vehicle purchased, you best look for one that you can. There are too many salespeople that talk people into purchasing "stuff" that the person really can't afford.

And yes, I think if you make less than 275K you should be looking at the 55k vehicles or less.

Just my opinion though..................

Well, I buy all my cars cash. But I would not tell others not to finance. America runs on consumerism. I love those off lease low mile luxury cars. Bought a 3 year off lease MB E300 for $32K with 12K miles. Original MSRP 65K. Traded after 2 years with 50K miles on it for $30K. Someone's "lease" took that big depreciation cut for me.

Anyway, I know people on the other side of the spectrum. Drives 20 year old toyota beater and live in a $1 million house. Spend only on essentials. Never goes to restaurant or vacation. Uses the saved cash to buy 2nd and 3rd properties for rental. Having more money/asset is their sole joy.

 

[DennisD]

So a person making $60,000 should buy a car for $12K or less by this ratio. Hello 2010 Ford Focus...

Unless he or she wants to be upside down most of their life, yes.

They sure in the hell shouldn't be buying a new car with that income. (if that is their sole source)

 

[4sallypat]

It seems too simple: Up to $7500 Tax Credit towards tax liability. The two of us are one entity that has tax liability as far as the IRS is concerned so her income should be part of the available credit. She uses my income and I use her income. I shouldn’t be penalized because she works for herself. I don’t see why the IRS is excluding her income, other than the way the tax form plugs in the number pre-SE tax.

A side question - did you get an EVSE installed ?

If so, you can use IRS form 8911 to get 30% back as a tax deduction.

I did that and got $300 + $7500 on my taxes.

 

[bncwhite]

A side question - did you get an EVSE installed ?

If so, you can use IRS form 8911 to get 30% back as a tax deduction.

I did that and got $300 + $7500 on my taxes.

I used that credit on my 2021 taxes. I got it installed before my car was delayed two months.

 

[Mach1E]

My wife has her own business and I can tell you that big brother has many ways to find out your business income, not too easy to hide it, unless it is a pure cash under the table business. But even in the latter case, you would not be able to have many write-offs/expenses or it would look very suspicious and trigger an audit.

For sure it depends on the business type to determine how easy it is to cheat. More cash? Much easier.

Also depends on the type of expenses. Some are just dang hard to track or prove. Work truck- prove how much was used for business vs personal. How much of your house is an office vs a house. You’re a contractor and buy materials for a client, but also for your own house. You have receipts, prove where it went. Etc.

Some other super common “cheats.” So many people not reporting or under reporting rental income.

Or do you know a waiter or waitress that actually claims all their cash tips? Not sure that person exists!

Or how about this one- trust your babysitter? They’re committing tax fraud if they make more than $400/yr and don’t report it. And if you pay them more than $2400/yr, you may need to file a W2 and do tax withholding for them as an employee!

It’s easy to try to point at billionaires or big businesses (since they have the most money), but reality is that they have the hardest time cheating. It’s the “little guys” doing it the most.

But usually not worth the IRS’s time or energy to do anything about it.

 

[Ride_the_lightning]

For sure it depends on the business type to determine how easy it is to cheat. More cash? Much easier.

Also depends on the type of expenses. Some are just dang hard to track or prove. Work truck- prove how much was used for business vs personal. How much of your house is an office vs a house. You’re a contractor and buy materials for a client, but also for your own house. You have receipts, prove where it went. Etc.

Some other super common “cheats.” So many people not reporting or under reporting rental income.

Or do you know a waiter or waitress that actually claims all their cash tips? Not sure that person exists!

Or how about this one- trust your babysitter? They’re committing tax fraud if they make more than $400/yr and don’t report it. And if you pay them more than $2400/yr, you may need to file a W2 and do tax withholding for them as an employee!

It’s easy to try to point at billionaires or big businesses (since they have the most money), but reality is that they have the hardest time cheating. It’s the “little guys” doing it the most.

But usually not worth the IRS’s time or energy to do anything about it.

Billionaires don’t have to cheat. The lower capital gains tax and 1035 real estate exchange rules are 100% legal . They just had the tax law changed so it’s no longer cheating to pay almost no income tax if you are wealthy enough.

 

[AZBill]

Billionaires don’t have to cheat. The lower capital gains tax and 1035 real estate exchange rules are 100% legal . They just had the tax law changed so it’s no longer cheating to pay almost no income tax if you are wealthy enough.

Wealth and annual income are not the same thing. But some politicians would like to tax people based on their net worth, year after year. Tax this year what was already taxed last year.

We should definitely go to a consumption tax, that is the fairest for everyone.

 

[Ride_the_lightning]

Wealth and annual income are not the same thing. But some politicians would like to tax people based on their net worth, year after year. Tax this year what was already taxed last year.

We should definitely go to a consumption tax, that is the fairest for everyone.

I said capital gains and real estate gains. Not wealth. I know the difference. My buddy that made $2 million flipping some farm land to a developer gets to defer any tax on his gains through a 1035 exchange, and 20 years from now would still only pay a preferential 20% cap gains rate (unless his kids inherit it, then the basis steps up and nobody ever pays any tax). Oh and he gets to deduct the loan interest he used to buy the property. Yet my other friend gets to pay near 35% income tax this year because he’s a doctor, with zero tax deductions for the 200k in student loads he has to be able to make that money. The “working rich” get hosed more than anybody else.

 

[Mach1E]

I said capital gains and real estate gains. Not wealth. I know the difference. My buddy that made $2 million flipping some farm land to a developer gets to defer any tax on his gains through a 1035 exchange, and 20 years from now would still only pay a preferential 20% cap gains rate (unless his kids inherit it, then the basis steps up and nobody ever pays any tax). Oh and he gets to deduct the loan interest he used to buy the property. Yet my other friend gets to pay near 35% income tax this year because he’s a doctor, with zero tax deductions for the 200k in student loads he has to be able to make that money. The “working rich” get hosed more than anybody else.

Doesn’t matter which tax version you pick because everyone has a different opinion on what is “fair.”

On a related note, if I were king, my tax code would look like this:

All income taxed the same. Doesn’t matter if it’s from investments, real estate, owning a business or working a job, every penny taxed on the same scale. Eliminate the tax differences between businesses. So dumb that the same company could be an S corp and taxed one way or a C corp and be taxed entirely differently.

I’d get rid of the tax rules at death. No stepped up cost basis and no inheritance tax. Both are kinda silly.

Eliminate itemized deductions and make the standard deduction $25,000 per person.

Simplify the tax brackets and even them out. No weird jumps like the current 10, 12, 22, 24, 32 percent etc. make them 10, 15, 20, 25, 30, 35 and 40%

You could do your taxes each year in 5 minutes on a single piece of paper. Pretty hard to cheat this system too.

I would start there.

 

[kennethjk]

For sure it depends on the business type to determine how easy it is to cheat. More cash? Much easier.

Also depends on the type of expenses. Some are just dang hard to track or prove. Work truck- prove how much was used for business vs personal. How much of your house is an office vs a house. You’re a contractor and buy materials for a client, but also for your own house. You have receipts, prove where it went. Etc.

Some other super common “cheats.” So many people not reporting or under reporting rental income.

Or do you know a waiter or waitress that actually claims all their cash tips? Not sure that person exists!

Or how about this one- trust your babysitter? They’re committing tax fraud if they make more than $400/yr and don’t report it. And if you pay them more than $2400/yr, you may need to file a W2 and do tax withholding for them as an employee!

It’s easy to try to point at billionaires or big businesses (since they have the most money), but reality is that they have the hardest time cheating. It’s the “little guys” doing it the most.

But usually not worth the IRS’s time or energy to do anything about it.

It should be worth their while to go after people in cash businesses. They just need the resources

my standard line is if everyone paid all their taxes (on all their income and legitimate business exlenses) we could reduce tax rates to half. Of course I have no evidence to prove that but as you said, how many people have paid cash to have work done around their home. How many people who have their own business put thru personal expenses?

on the other side of the coin because credit card use is so high nowadays cheating is lower than it had been in the past.

plenty of honest people out there but plenty of people who scam the system.

 

[DennisD]

Doesn’t matter which tax version you pick because everyone has a different opinion on what is “fair.”

On a related note, if I were king, my tax code would look like this:

All income taxed the same. Doesn’t matter if it’s from investments, real estate, owning a business or working a job, every penny taxed on the same scale. Eliminate the tax differences between businesses. So dumb that the same company could be an S corp and taxed one way or a C corp and be taxed entirely differently.

I’d get rid of the tax rules at death. No stepped up cost basis and no inheritance tax. Both are kinda silly.

Eliminate itemized deductions and make the standard deduction $25,000 per person.

Simplify the tax brackets and even them out. No weird jumps like the current 10, 12, 22, 24, 32 percent etc. make them 10, 15, 20, 25, 30, 35 and 40%

You could do your taxes each year in 5 minutes on a single piece of paper. Pretty hard to cheat this system too.

I would start there.

While I don't disagree with the many points you have, the bottom line with this thread is that if you are not eligible to receive the total tax credit of $7,500 because of your tax bracket in 2022, one should be looking at other options.

On a side note, I used to teach "regular" school along with my Driving School business. It eventually got to the point where I was making way more money in my business than my "regular" job and I was paying a lower percentage in taxes due to many perks that I was able to enjoy from being a corp etc.

Owning a business has many tax advantages and the more money you make, the more lucrative ways in paying taxes get.

It is not fair............................. I have been saying this for years btw.

Nice post btw.

 

[TGIF]

FWIW, I work directly with a lot of CPAs.

And the people here are much more knowledgeable when it comes to this specific tax credit.

It may be all we know, but we know it well!

I’m pretty sure I know more about the EV tax credit than my CPA. AFAIK I am his only client to claim it. He didn’t file for it on my PHEV despite me giving him all documentation and telling him to. Waited months for the refund after making him do an amended return, but at least I was paid interest from the date of filing. I bought two MMEs last year taking delivery of the second one the day before the new law was signed. He better get it right this time.

 

[kennethjk]

I’m pretty sure I know more about the EV tax credit than my CPA. AFAIK I am his only client to claim it. He didn’t file for it on my PHEV despite me giving him all documentation and telling him to. Waited months for the refund after making him do an amended return, but at least I was paid interest from the date of filing. I bought two MMEs last year taking delivery of the second one the day before the new law was signed. He better get it right this time.

you probably should be changing CPA’s but he probably has learned his lesson

 

[dbsb3233]

you probably should be changing CPA’s but he probably has learned his lesson

Or just use TurboTax.

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