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Tax Credits

EyeOnMachE

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Got it. I mistakenly read "Congress decided late Monday not to raise that threshold to 600,000, while reducing the EV credit to $7,000," as two separate statements - congress shot down the threshold increase "but instead" lowered the EV credit to $7000. So I thought there was news / documents indicating the $500 decrease. Clearly not the case. My bad.

Also, I was under the impression from others that the White House / Trump wanted to eliminate the EV tax credit all together, but I suspect that's not the case. It's the "extension of the threshold" they were against. .... So the federal EV tax credit lives on (for now) with the phase out still at the manufacturer level.

Thanks to all that replied! Happy Holidays!
 
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macchiaz-o

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Well it looks like the States are getting greedy and are going to help kill EV's with higher taxes.
Get ready for more states to charge EV fees in 2020
https://electrek.co/2019/12/27/get-ready-for-more-states-to-charge-ev-fees-in-2020/
The original source on that is Consumer Reports. I looked at their documents, but at least for my state, the source materials that they're citing are behind a paywall so I can't read them. (A web site called EV HUB.)

My guess is that a lot of these proposals won't be approved or voted in.

That said, municipalities that have been using gasoline taxes as a significant source of their roadway infrastructure budgets are going to need to replace them with something... According to Consumer Reports' research, Arizona's state highway budget is largely paid for by gas taxes (34.2%) and vehicle license taxes (aka property tax, 21.4%). Hopefully whatever we end up with is at least reasonable.

I think for me here in Arizona, the property tax I'd pay for a $50k car in its first year would be roughly $850 whereas if it's an "alternative fuel" vehicle like a battery electric, then it drops down to about $10, if I'm understanding the rules correctly. (I might not be.) In either case, the rate drops by about 16% each subsequent year, with a $5 minimum tax.
 

FusionEnergi

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If you live in California, rebates for EVs and Plugin hybrid also changed. Range for plugin has changed to 30+ (don't quote on that lol) and to qualify for federal tax incentives the MSRP has to be below $60K. Mach e that is above $60K will not qualify for federal tax incentives. Its effective as of Dec 3rd I think.
 

macchiaz-o

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If you live in California, rebates for EVs and Plugin hybrid also changed. Range for plugin has changed to 30+ (don't quote on that lol) and to qualify for federal tax incentives the MSRP has to be below $60K. Mach e that is above $60K will not qualify for federal tax incentives. Its effective as of Dec 3rd I think.
You mean qualification for state rebates, right? California's changes don't prevent you from getting federal tax incentives.
 

FusionEnergi

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You mean qualification for state rebates, right? California's changes don't prevent you from getting federal tax incentives.
Yes...you are correct. 60k only applies to the the state rebates.
 
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I don't mind paying my fair share but I can see this getting out of hand. My state (WV) has a .57c gasoline tax and it also has a lottery that was supposed to help keep roads up but all this state is doing is patching the patches and putting up rough road signs. Where's the money, over taxing 1% of car sales isn't fair since I have to pay taxes on my cars every year.
 

macchiaz-o

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I think a lot of states are facing the same problem -- taxes for roads that don't keep up with inflation, in addition to taxes based on dispensed gallons of fuel but cars are getting more efficient.

Oregon is trialing an interesting concept that is based on miles driven on Orgeon roads. http://www.myorego.org/about/volunteer/

At first, it seems like a good way to go to me, except that their current implementation seems to require a GPS- and cellular-enabled device to be plugged in to the OBD-II port. Battery electric cars aren't required to have that port. Plus I've got some serious security/hacking and reliability concerns with it.
 

jeffdawgfan

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Everyone needs to be aware that it is a tax credit.....not a tax refund. It will only help you if you owe additional taxes.
 

benboy12

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Everyone needs to be aware that it is a tax credit.....not a tax refund. It will only help you if you owe additional taxes.
It’s a tax credit but it goes against whatever has already been withheld, and you will receive a refund of the amount withheld up to $7500.

Basically, if you have $7500 withheld in federal income taxes for the year, and you would have owed the IRS $0 when you filed your tax return (meaning your tax liability for the year would have been $7500), the IRS would give you a refund of the $7500.

The only time you wouldn’t receive a refund for the full amount is if either A.) Your total tax liability for the year is less than $7500, or B.) your employer didn’t not withhold enough taxes from your paycheck and you would owed money at the end of the year if you had not purchased the vehicle.

I would think most people planning to purchase a car at this price would pay more than $7500 a year, but I realize there may be folks in different situations such as those who are retirement age with low annual income, but a large nest egg, that wouldn’t be able to benefit.
 

macchiaz-o

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Yeah I understand it the way @benboy12 does, with a little clarification:

To me, it's confusing to think of this in terms of needing to make a tax payment in April versus receiving a refund check from Uncle Sam. All that this tax credit does is reduce your tax liability, dollar for dollar, but without going below $0 (since it's a "non-refundable" tax credit).

Whether you've underpaid or overpaid your taxes is a different concern, and that's a bit further down on your 1040.
 

dbsb3233

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How many current reservation holders will cancel if the full $7,500 Federal Tax Credit runs out?
I would. That's the main reason I'm jumping on it now instead of waiting a few more years until better batteries/range/charging are likely coming out. Even as it is, I'm wavering on following through.

There's an additional tax credit in my state too ($4000 in 2020, $2500 in 2021/22). Probably no chance of getting Mach-e delivery in 2020 though (my reservation# is 290xx). But that still adds up to $10k in 2021. If I couldn't get most of that I'd wait another year or two when there's probably more choices and better batteries.
 

dbsb3233

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I would think most people planning to purchase a car at this price would pay more than $7500 a year, but I realize there may be folks in different situations such as those who are retirement age with low annual income, but a large nest egg, that wouldn’t be able to benefit.
Although that is usually fixable too. You simply take a bigger one-time withdrawal from your IRA or 401(k) to boost your tax liability for that year. (Most retirees buying a $60k vehicle are gonna have a significant IRA or 401(k) account.) That's the boat I'm in. In fact, most of the $60k (or so) for the Mach-e purchase will come from an IRA withdrawal, so it mostly offsets itself.
 

dbsb3233

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I think a lot of states are facing the same problem -- taxes for roads that don't keep up with inflation, in addition to taxes based on dispensed gallons of fuel but cars are getting more efficient.

Oregon is trialing an interesting concept that is based on miles driven on Orgeon roads. http://www.myorego.org/about/volunteer/

At first, it seems like a good way to go to me, except that their current implementation seems to require a GPS- and cellular-enabled device to be plugged in to the OBD-II port. Battery electric cars aren't required to have that port. Plus I've got some serious security/hacking and reliability concerns with it.
Yep. Security/hacking concerns... privacy concerns... cheating concerns... and out-of-state vehicles not paying. There's just too many holes.

Frankly, I think it's getting to the point that there is no good index for estimating road usage anymore (gasoline used to be pretty universal and reasonably linked to miles/weight). Since roads provide such a broad benefit to all citizens from everything from personal transport to goods/services, something like a sales tax will probably become a more common funding mechanism. Taxing chraging stations won't work because most people will charge at home.
 

larryjwhite

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It’s a tax credit but it goes against whatever has already been withheld, and you will receive a refund of the amount withheld up to $7500.

Basically, if you have $7500 withheld in federal income taxes for the year, and you would have owed the IRS $0 when you filed your tax return (meaning your tax liability for the year would have been $7500), the IRS would give you a refund of the $7500.

The only time you wouldn’t receive a refund for the full amount is if either A.) Your total tax liability for the year is less than $7500, or B.) your employer didn’t not withhold enough taxes from your paycheck and you would owed money at the end of the year if you had not purchased the vehicle.

I would think most people planning to purchase a car at this price would pay more than $7500 a year, but I realize there may be folks in different situations such as those who are retirement age with low annual income, but a large nest egg, that wouldn’t be able to benefit.
You need to take into account any deductions that you will be taking. If you take the standard deductions for 2020
Married filing jointly$24,800
Head of household$18,650
Single/married filing separately$12,400
Your tax liability has to be at least $7500 more than that after All deductions.
 



 









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