First, let me be honest. I don't have a prius plug in yet. But I am considering one and want to know how the tax incentive works. Is it a $2500 reduction in taxable income or is it more like a rebate where you get $2500 in real money back? So say without the credit you would have broken even but with the credit you get $2500. Thanks.
Its only good for the year you purchase your Plugin Prius and its a credit so as long as you had at least a $2500 federal tax liability that year , your federal taxes are reduced by $2500. If your federal tax liability is over $2500 and your payroll tax payments are equal to that liability then you would be getting a nice $2500 refund when you file your taxes
Thank you very much. So it is potentially dollar for dollar, and not a reduction in taxable income. Sounds pretty good. And I have another off the wall question that I wonder if anyone can answer. I have actually found a new 2012 prius plug in. Seems incredible but its true. It is the advanced model so I am hoping to negotiate a good deal on it. I wonder if this car would be eligible? It is new, but it is from 2012. Thanks.
As long as its new (never been sold and all paperwork should show it as a new vehicle) your good. Note: this credit does not apply to leases
Might not hurt to ask a little more about why this car is sitting around. Hurricane Sandy impacted some new cars in the Northeast area. What state are you in DroopDog?
If my my fed tax liability is less than $2500 - lets say only $1000, then how can I get back remaining $1500?
No way to get it back! the Federal tax credit only applies to the extent you actually owe tax for the year. >>But now is a good time to consider year end tax moves to increase the amount of tax you owe. For example, take some gains on that Tesla stock you purchased at $25, or take an IRA withdrawal...not to say I am recommending those things, just saying examples.
An IRA withdrawal for those under 59 1/2 will trigger a 10% penalty. Those using the withdrawal for the approved hardship cases probably shouldn't be buying a new PiP.
If you don't owe at least $2500, then you lose the remainder. In your example, you'd only get $1000 back. On a related topic, it's probably one reason why a lot of people are leasing Volts and Leafs, because they wouldn't get the full $7500 credit (the max you can get based on the battery size), aside from other issues preventing them from wanting to just buy it such as huge depreciation and unknown battery longevity issues. The PiP btw doesn't have that issue, unless you're really low income They really should have written that tax credit so that you could take a few years to claim the full amount if you don't owe at least $7500. This way everyone benefits completely from it, not just people who have high incomes. So it's sort of misleading when those cars are advertised with the $7500 tax credit amount taken off the price of the vehicle as if everyone were going to get that back. To be fair they at least say "up to $7500", but it can still throw people off. I wonder if they're willing to knock the price down to make up for that if someone who wants that Leaf/Volt but only makes $45k a year, would they take an extra $500 off for them, or allow $500 more on their trade-in? Probably wouldn't hurt to ask, especially if gas prices stay low and nobody wants to buy them.
Note: I certainly do not recommend selling IRA funds to buy a PiP, but the 10% penalty is immaterial if you get it back as a PiP tax credit, right?
