I apologize if that question has already been asked, but I'm looking for a simple tax credit explanation. With this scenario: Let's say I am getting a refund of $2,000 dollars on my taxes. Does the $4500 add to my refund? Do I now get $6500? OR, if I am already getting a refund, do I basically get hosed and lose out on the $4500?
Yes, the hose answer is the correct one. The $4502 Federal tax credit can be applied against any PERSONAL income taxes you owe the IRS for the year of the purchase; if you owe no taxes, you get squat! It's the application of the "hose principle" as you have so elegantly described here!. I feel for you 'cause I'm faced with the same conundrum. If you get a refund, you probably still paid taxes; it's that amount that can be reduced by the credit. NO, I am not a CPA, or attorney; you need to consult your accountant to verify the facts. Good luck! .
Rather than looking at your refund, you need to look at your tax liability. The refund only means that you withheld $2,000 more than your tax liability (for example, if your liability was $6,000 but you had $8,000 withheld throughout the year, that's a $2,000 refund). Line 47 on the 2016 1040 form shows your tax liability. If that number is greater than $4,502, you will get the full credit. If it's less than $4,502, you will only get the credit up to the amount that brings your liability to $0 (or whatever minimum tax you owe). So taking the example above, your liability is $6,000. Subtract the full credit of $4,502, your liability drops to $1,498. You had $8,000 withheld throughout the year, so now your refund is $6,502. Other tax factors may come into play, but that's the simple explanation.
To amplify what @pricoaster described, here is an example: $27,310 - tax liability line 47 $5,432 - tax credit both Prime and EVSE line 55 $21,878 - reduced tax liability line 56, where the "$-0-" rule applies The key is the tax liability should exceed the tax credit. If not, the "$-0-" rule applies and money is left on the table.
So your tax liability is only based on how much money you owe the government for the tax year. Changing how much is taken out doesn't change anything. The only thing you can really do is make more/less money to change your tax liability. So if you make a lot and can afford this car, you'll probably be fine. (From my understanding) I make like $50k. Some is taken out for retirement and not taxable. Tax liability for me is like $5500 or so. There's calculators for trying to figure it out online that are nice. Posted via the PriusChat mobile app.
If don't have enough liability to get the full credit, and a standard retirement fund, you could increase the liability by converting that fund to a ROTH one.
That is exactly what we are doing (changing to a Roth). We are still claiming one in college and didn't want to jeopardize losing either credit. (college credits or prime credit)
This thread might be of use. Yes it has tax info in it. 2017 Toyota Prius Prime: 25 Miles EV Range, 54 MPG, $22,600* | Page 6 | PriusChat
Tax credit may still be at risk this year; definitely a political football. Good article from SF Chron: https://www.google.com/amp/www.sfchronicle.com/business/networth/amp/Will-electric-vehicle-credits-survive-federal-tax-10958127.php
Yes the current administration has no love for clean air incentives. If it doesn't promote petroleum or coal, they would very much like to get rid of it.
