New Prime purchase. About the federal rebate

You can get as many credit as you purchased qualified EV for that tax year. But, remember this is a tax credit that applies to your tax liability for that year. If you don't have enough tax liability for that year, you will not get the remaining credit that year or any subsequent years.

 

well I owe 5k in taxes, so better go buy a new car =P

 

Talk to a tax professional. Don't get your tax advice here.

You might have withholding or other over payments that you can get back via the credit. Having a refund already doesn't necessarily mean you don't have tax liability. This is not intended as advice. Just pointing out it can be confusing.

 

It's not confusing. A "tax credit" reduces your total tax owed and a "tax rebate" is a fixed amount you get from the IRS. That's all there is to it. People are just confused about whether the electric vehicle incentive is a tax rebate or a tax credit. It's a tax credit.

If you have the following table:



D = B-MAX(0,A-C) would give you what you would normally expect to receive in the form of a refund.

 

I'm sorry but I still don't understand the federal tax credit.
Numbers to be used as example only:
I make $100,000 per year (I wish)
I pay $20,000 federal tax per year.
Does the Federal tax credit get me an extra $4500 in my 2019 tax return? or does my income get reduced to $95,500 and my taxes are adjusted based on that income? Maybe an extra $1000 in my pocket?
Thank you in advance.
Mark

 

Neither.

You had $20,000 withheld in Federal taxes.
Based on your income and deductions, if you only owed $16,000 in Federal taxes, you would receive a $4,000 refund from the IRS.
If you then claimed the $4,500 federal tax credit for the car, you would receive an $8,500 refund from the IRS.

Posted via the PriusChat mobile app.

 

A tax credit isn't based on your income or how much you paid, it's based on how much you are supposed to pay given your particular income, filing status, deductions, and other credits or rebates. In other words, the amount on line 15 of Form 1040 is reduced by the amount of the credit or set at $0, whichever is greater.

 

That would be a deduction, not a credit.

Close. A tax credit amount is applied to the amount of taxes owed. For many works out as an increase in the refund, but if you buy early in the year, you could adjust your withholding to reflect the tax credit, and essentially increase your income by the credit amount. Though it isn't possible to change withholding by a set dollar amount.

Most important, this tax credit doesn't roll over to following years. If you owe less than the credit amount, you won't get the excess amount of the credit after it covers your tax bill.

 

This might help...

Electric Vehicle Tax Credits: What You Need to Know | Edmunds

How Do Electric Car Tax Credits Work? | Credit Karma

 

What about timing. I'm planning on purchasing a Prime in late in December. Are there any deadlines to file the paperwork to get the tax credit? Is there any danger of this tax credit "running out"?

 

Just to clarify: Normally I get back about $1800-$2000 From my Federal return. Preliminary glance at my 2019 taxes I think I will be getting back approximately $2100. So, if I purchase a new Prime I should get back $2100 + $4500? Sounds too good to be true.

 

The important one now is taking legal possession of the car, before New Years. The tax credit paperwork is normally due next April 15, though six month extensions are ready obtained.

The amount you normally get back as a refund is completely irrelevant. The amount that matters is Total Tax, Line 15 on Form 1040 (last year at least). It would be a different line on Form 1040EZ or 1040A or whatever other simpler forms are still in use since the latest Tax Act.

If the income tax withholding shown on your pay stubs (don't include the Social Security, Medicare, and other withholdings) is greater than $4502 plus whatever you normally get back, then you are likely in the clear, or close enough to get most of it. But the devil is hidden in numerous details that you likely won't discuss here in public.

 

If you purchase the car and take delivery before 12/31/2019, then you will file the credit on your 2019 tax return in 2020. If you puchchase in Jan 2020, then you will not see the credit until you file your 2020 income tax in 2021.

What you usually get on a tax return has no bearing on the credit amount. You must have at least $4500 tax liability in order to qualify for the full amount of the credit.

edit: @fuzzy1 beat me to it.

 

So, My amount on line 15 (of 1040) will be approximately $13,000

 

That exceeds the credit of $4502. Provided nothing else sneaks in this year, you should be getting the full credit. That credit will be added on to your refund.

If Line 15 was between $0 and $4502, then the credit would be reduced to that amount. If Line 15 was $0, then no credit would be available.

 

Also, I heard the phase "the tax credits can run out" as if all of the tax credits for 2019 could be gone. Any truth to that?

 

For GM and Teslas, the credits are being already phased out. Buyers of those still get reduced credits for a while.

No other car makers have hit the caps. Credits for them don't start phasing out until their brand's sales caps are reached. And the phaseout calendar will happen by calendar quarter or half, not by when a single particular customer hits the top mid-month.

If a salescritter warned you about credits possibly running out, then he was using scare tactics, FUD, to get you to hurry up. That will happen eventually, but for Toyota that is still a ways off.

Congress can also terminate the program early, but any such action would be in the news.

 

Thanks to everyone for the help. The is very exciting.
I'm looking at LE's. There is currently a $3000 Toyota incentive, $1100 NY refund, the Federal $4500 tax credit ....plus what ever discount I can get from the dealership. May be picking one up next week.

 

Here is a crude guideline, presuming that one's income and taxes and family situation are really really simple. Most people's forms are not this simple, there are lots of other items and credits and deductions that move around the real answer. Remember that this is not professional advice, go pay a tax professional for more detailed and possibly 'guaranteed' answers.

For a taxpayer filing as Single with just ordinary wage income, no kids or other income or deductions or credits or complications, etc., the minimum income to get the full credit is about $51,330. (The minimum wages for any credit is $12,200.) This doesn't include pre-tax items or withholding for 401Ks, IRAs, tax-favored medical premiums or savings plans, etc., so if you have those, make sure these amounts are subtracted first.

For taxpayers Married Filing Jointly, the equivalent minimum is $65,150 for full credit, or $24,400 for any credit.

Corrections welcomed, I am not a tax professional.

 

Tesla phase-out began January 1 of this year (2019), ends December 31. GM phaseout began April 1, ends March 31 next year.

Here is the IRS notice for GM, notice that there was more than a 3 month delay from when the cap was reached until the phaseout actually started:

Plug-in electric vehicle manufacturer crosses 200,000 sold threshold; tax credit for eligible consumers begins phase down on April 1

"IR-2019-57, March 26, 2019

WASHINGTON — The IRS announced today that General Motors, LLC has sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit during the fourth quarter of 2018. This triggers a phase out of the tax credit available for purchasers of new General Motors plug-in electric vehicles beginning April 1, 2019.

Qualifying vehicles by the manufacturer are eligible for a $7,500 credit if acquired before April 1, 2019. Beginning April 1, 2019, the credit will be $3,750 for General Motors’ eligible vehicles. On October 1, 2019, the credit will be reduced to $1,875 for the next two quarters. After March 31, 2020, no credit will be available."

Here is the IRS page for all qualified EV makes and models:
IRC 30D New Qualified Plug-In Electric Drive Motor Vehicle Credit

... and Toyota specifically: