Ran a sample Turbo Tax scenario...

If you filed using 1040 form, look at your taxes on line 47. In order to get the full $4502 for the Prius Prime, your total taxes on line 47 have to be at least $4502. If it's not, you will only get a credit equal to your taxes on line 47. If you know before the year is up that it is going to be less than that, you have to make adjustments to increase your taxable income to get your taxes up to $4502 or you will miss out on the full tax credit for that particular vehicle. I bought my Prime on December 3rd and realized I had a month to increase my income to get my full $4502 credit. I just met that amount to get that credit.

#1 in Easley,SC

 

You also need to make sure your withholdings out of your pay for the year, covers the amount on line 47. If it doesn't, the credit will cover the shortage and you won't get the full $4502 as an added refund.

#1 in Easley,SC

 

Don't forget that this tax credit may be eliminated for tax year 2017 by he who eliminates programs.....

I would urge caution and not enumerate domestic fowl before emerging from shell.

 

One Dec 9, I was not planning to buy a Prius Prime and then the BMW i3-REx motor mount bolt broke and I had to use our back-up, 2010 Prius. Faced without collision avoidance and dynamic cruise control along with the BMW i3-REx single-source, tire problem, I realized it would be a risky retirement car. By Dec 21, I had found the Prius Prime bought and not a whole lot of time to tweak withholdings.

Last year, my tax burden was north of $5k and I had to make up the difference with a $2k check. I adjusted my W-4 to shoot for closer to just under $0k. If I did my maths right, there should be no check this year. But my understanding is the tax credit(s) will pretty much zero out liability and hopefully let my over-paid, withholding come back to the family. No, I won't get any excess credit as a refund should they exceed my liability. I'm just looking to get back a big chunk of the 2016 withholdings.

Bob Wilson

 

Your withholding really has nothing to do with the amount of the credit you can take advantage of. As long as your tax liability (line 47) is over $4500 you can take advantage of the full credit. Now depending on your withholdings throughout the year, you may not get back the full $4500, say if you under-withheld. But you may get back more too if you over-withheld throughout the year. Line 64 shows the amount of tax you paid throughout the year.

 

i must ask, how does one increase one's taxable income with a month left in the year, second job?

 

I switched gears and went from 23% pretax to 23% Roth contributions and also took a small taxable withdrawal out of my 401k. Also increased my overtime worked. With all that, I increased my tax liability.

#1 in Easley,SC

 

It's so I get the money in January through April of 2017 rather than in April of 2018.

 

Withholding is nothing more than handing over your money to the IRS to hold onto for you, to avoid that you don't spend it during the year and not be able to pay your income tax when it is due. Technically it is still your money up until when you file your taxes, at which time it is used to pay all or part of your tax liability for the previous year, depending on how much you had withheld. You have a certain amount of control over what is withheld during the year by what you fill out on your W-4, which can be amended multiple times throughout the year if so desired. In general the best strategy is to try and withhold only as much as is needed to avoid a penalty for under-withholding. Over-withholding results in a refund, which although it may be somewhat enjoyable, means that you essentially gave the IRS an interest free loan for several months. But as always consulting a tax adviser is the best practice.

As stated by others, getting the $4502 tax credit (or whatever amount you quality for) has nothing to do with how much you had withheld during the year, although the amount withheld will determine whether you get all or part of the credit sent to you in the form of a refund.

In all of these examples the tax liability was $7,000,

7,500 withheld
7,000 tax liability
= $500 refund

7,500 withheld
7,000 tax liability
4,502 credit
= $5,002 refund

6,500 withheld
7,000 tax liability
= $500 tax payment due

6,500 withheld
7,000 tax liability
4,502 credit
= $4,002 refund

2,000 withheld
7,000 tax liability
= $5,000 tax payment due
(and a penalty for under-withholding)

2,000 withheld
7,000 tax liability
4,502 credit
= $498 tax payment due
(I don't think there would be a penalty for under-withholding, but this should be verified with a tax adviser)

 

I usually plan to break even each year, but this year I got the tax credit as a refund being that I didn't plan on buying a car until the last month of the year.

#1 in Easley,SC

 

I was just telling you why that topic was being discussed. It wasn't about whether or not you get the rebate, just about when you get it.

 

isn't a certain amount of tax due quarterly, or by 12/31 of the working year? i don't think you can wait until april 15th to pay the entire amount you owe.

 

Yes...there are penalties for underpayment of withholding or estimated taxes. They're pretty small, however. One year, I was $8,000 under and my penalty was $19.

 

If you're old enough, a whopping withdrawal from your 401(k) will do. You're going to have to withdraw it starting at age 70.5 anyway. Do a Roth IRA conversion.

 

Sell options that are expected to expire in December.