Understanding the Prius Prime Tax Credit?

Never mind your witholdings. It’s what you pay in taxes. Your tax liability. Also if you purchased the car this year it will depend on your taxes due for 2018.

 

That is rounded. The real number is $4502.

So if you had bought the car in 2017, you would have received a tax credit of $4218, and missed out on $284 of the possible credit.

Assuming you actually bought it this year, the credit will depend on this year's income, not 2017 numbers. How much is that changing? Plus, Trump's tax cut changes things somewhat for this year, and I haven't refreshed myself on the new rules and tables.

... not relevant. Withholding doesn't figure into the calculations.

Are you single with no dependents? If so, we (or someone) can review the tax tables and give you the income numbers needed to get the full credit. There is no point in stressing about it now, because the only thing you can do to 'fix' a shortfall is to earn more income, which is generally a good idea even when not trying to grab a tax credit. You can't fix anything by adjusting withholding.

(Two things that young wage earners might do to adjust taxable income without changing real income: 401K and traditional IRA contributions will lower taxable income, while Roth conversions of 401K/IRA money will boost taxable income. These maneuvers can sometimes be used to meet certain income & tax targets. Just beware that the new tax law has changed the rules on Roth conversions, reducing flexibility and abolishing the "undo" button. )

 

total tax = $4,128. is this all federal?

 

Most of the major 2018 tax software (Turbo Tax, H&R Block, etc) are now available for 2018, so it is possible to start doing estimates for the current tax year.

 

There is a separate schedule that you need to complete that will generate the tax credit. I am sorry I don't remember the number.

 

How many years can you use the tax credit over? If you can't use it all this year, can you use the remainder next year?

 

Stop right there.
The max. tax credit you can receive is the total tax that you owe......taking the amount you owe down to ZERO.

And in the past, any excess could NOT be carried over.

 

Nope, one time only.

 

The IRS sent me a check for everything after deducting what taxes I owed. Basically if you add your with holdings and this tax credit. Then subtract the taxes that you owe. You will receive a payment for that amount. Also check with your state, I received a rebate of $1,500 from my state.

 

For a quick guestimate for tax year 2018, I'm figuring that getting the full $4502 income tax credit for a Prius Prime requires this taxable ordinary income for single filers without deductions:
$12,000 standard deduction
$_9,525 in 10% bracket
$29,579 in 12% bracket
=================
$51,104 total ordinary (e.g. wages) income.

Beware that there are plenty of additional factors and non-ordinary income and deductions that can come into play for many people, and I'm not a tax professional, so this isn't the final word on anything.

For someone coming up a bit short, it might help to make a partial Roth IRA/401k conversion to help make up the difference. As a transitioning retiree (i.e. no longer earning any wages, but not yet receiving any retirement benefits), Roth conversions are a big portion of my current taxable income, and I get to tune the amounts each year to suit my purposes. Uncle Sam will eventually tax it all, but for the moment I have some control of when it gets taxed.

 

Basically Line 44 would be reduced to Zero but not more.

 

https://www.irs.gov/pub/irs-pdf/f8936.pdf

 

It means you don't have to pay the tax on line 44 in your case.

 

Move on down to Line 63, total tax. (For many people with simple taxes, this will be the same as Line 44.) That would have been the amount you could have received for a Prime credit if you had purchased that year.

But tax laws and rates and tables changed for this year. For the quick guess, go back to Line 37, Adjusted Gross Income. How much do you expect on this line for 2018? For the simplest tax situations, you'll need $51,100 on this line to get the full credit.

You'll get most of it, just not all of it, if your income and tax are a bit short.

I.e. Last year you would have received $4128 back. (I.e. you would have got back your entire withholding of $4925, not just the $797 that came back without a Prime credit.).