Maybe We Should NOT Count on the $4,500 Federal Credit

Anything is possible, but to my knowledge there has not been any iota or suggestion to end the credit.
Mostly we are hearing tons of speculation, worry and paranoia (but OK maybe that's understandable).

One way to look at it, the autos will probably get out of the EPA 52.5 MPG mandate (which was never 52.5 anyways). So they can keep the Plug_in incentive as a token climate change spin point. Keep in mind, Plug-Ins like E10 ethanol probably have nothing to do with eco-goodness, it's all about creating new jobs in America.

The bigger issue is so many states (eg; CA) going off on their own climate change strategies, which is OK as long as it does not negatively impact the rest of us (which it probably doe$).

 

NOT necessarily. For 2016, we got a tax refund for the $650 (*) more that we PAID INTO Fed Income Tax (during the year)... $650 more than what we OWED based on our income AFTER all deductions... based on our "taxable income". During the year, we paid a total of $4,650... but we "should" have only paid $4000, so we got back that $650... in effect leaving $4000 of taxes "on the table".

IF we had bought a Prime during 2016, then we would have gotten that $4000 back as well. Not the WHOLE $4500 that is available, but a significant amount nonetheless....

(*) All dollar amounts given are "examples" only, but they DO closely reflect what our situation would have been.

 

It's really better to not think about withholding, refunds etc. when thinking about the tax credit, as it tends to just confuse the issue. The only really important thing to think about is your tax liability, the amount that when all is said and done is the total amount that you paid the IRS for that particular tax year, because that is the expense viewpoint. How much of the liability you prepaid via withholding, or whether you overpaid during the year and wind up getting a refund, is really not relevant from an expense point of view. That's only a short-term cash flow phenomenon that will not have any long term effect on your finances. No different than overpaying a bill of any type and getting a refund, which has no effect on what your actual expense was. It's only the actual expense that affects your long term finances, not how or when the money shuffled back and forth while paying that expense.

The Qualified Plug-in Electric Drive Motor Vehicle Credit reduces your tax liability by $4,502, unless as stated by others you had less tax liability than that for the year that you purchased the car. That's the only important thing to think about, how much of your tax liability is reduced. Remember that tax liability is not what TurboTax (or your tax preparer) tells you at the end of the process when they tell you if you owe money or get a refund. That's just cash flow. Tax liability is your actual tax expense which is calculated earlier in the process.

Yes the credit can increase your refund, or create a refund when there would not have been one, depending on how much you had withheld during the year compared to your liability. Maybe you want to think about that if you plan to use the refund for a vacation (or window tinting!) but again that's just cash flow, and should be a separate topic in our thinking than the impact that the credit has on our expenses.

To put it more simply, the $4,502 credit, if you quality for all of, makes you $4,502 richer than you would have been without it, regardless of what else may have happened to your money during the year.

 

I'm kinda of two minds regarding writing to our Congressmen in favor of the EV tax credit: Let them know what we think vs. just keep quiet in hopes they won't notice it...

I'm thinking write if your reps are likely to be in favor of the credits, but zip your lips if they're Tea Party...

 

According to IRS Form 8936, on the income tax 1040 form for 2016 taxes the tax credit of $4502 would go onto line 54 in the Tax and Credits section. This is where things like a deduction for an IRA contribution and other credits would go. For me, after those were removed my tax liability was $5352 so had I bought my Prime in 2016, I would have only owed $850 and the $4502 would have been added to my refunded amount. I guess if I had not paid more taxes than the $5352 it would still lower my liability to $850, thus still saving me $4502.

I think the big questions are will the deduction be eliminated from 2017 taxes owed and, individually, did you owe more than $4502 after all your other deductions. If you did, you will get up to $4502 of that excess taxes amount paid refunded (or not owed), if it is not eliminated.

 

it's funny how every time someone starts a tax credit thread, everyone who understands it tries to explain it, and everyone who reads the explanations feels the need to 'clarify'. and after 50 or a hundred posts, someone starts another thread all over again.

 

And this chain of events is different than most other subjects discussed in this forum........how exactly ??

 

good point.

 

If you are getting a tax credit, then you can adjust your tax withholding or prepay to account for it.

Remember, if you are getting a refund, you are giving the government a free loan.

There will be one for 2017. Congress does not move fast. At least for something small or doesn't affect them directly.

 

The main concern here is not so much with Congress, but the President, for whom repealing an EV tax credit would be appealing since it would be very popular with his base constituency.

 

I don't mean to be a nitpicker, but your numbers don't add up. A 498 liability + 1000 withholding = 502 refund

 

Thanks for catching that. You are right. It is now fixed.

 

Edit: 498 liability and 1000 withholding =502 refund.

 

At the risk of over-simplifying things and/or sounding as though I hesitate to take your word for it: Man-oh-man, I hope you're right!

 

I have not heard such cries for repealing it lately. Last one was during the middle of the gen1 Volt's cycle, and it came from a congress critter that was pissed that GM tried to close his Chevy franchise away during the bankruptcy.

Taxation is the purvey of Congress, and the Courts have already shown they will block executive orders that overstep the President's authority. Trump can't repeal it for the same reason he can't add any new taxes.

 

Do you know how long you have to keep the car after the credit?

 

I am not aware of any time requirement on the Federal credit. State credits are all unique rules and may have time limits (believe Ca. does have a minimum time requierment).