Tax Credit question...specific situation

Stop driving on our gas-tax funded roads when you're in EV mode.

Must suck to live everyday, waking up, only to think "off to work, so the government can steal from me more". Great life philosophy.
Seriously, move. Federal, state and local taxes have been around before you were born. Emigrate to somewhere without them if it bothers you so much.

 

Fortunately or not (Likely the latter from your point of view), that's already been done. Pretty much everywhere across the entire planet. Since you missed the formative stage of nation-building, you must cope with what is, not some Ayn Rand/libertarian fantasy or its anarcho-communist equivalent (this applies to people at the opposite end of the spectrum you appear to inhabit, so it's not particularly aimed at one ideology). So what are the options?

1. Move to a more palatable society with rules closer to one's personal views. Fine for some people, not readily available to most.
2. Work within the system to implement changes more favourable to one's personal views. It's usually a very slow, tedious process that takes years, if not generations.
3. Foment revolution for swifter change. Almost unavoidably violent if this option is selected.
4. Do nothing (and complain about how the system works).

As to the social contract? Well, no one actually needs to sign it for it to apply--it exists by virtue of the existence of any community. It is subject to change over time (otherwise plantation slavery would still exist in the US, women would be denied the right to vote in many more places, children would still work in textile factories...wait, that one still happens, etc.). And while formal legislation was required to make changes to women's voting rights and ending slavery, that legislation was a consequence of changes to the implicit social contract that applies to the community (i.e., the contract no longer tolerated the maintenance of norms that allowed such practices to continue--while in those societies where children are still stuck in factory work rather than going to school, the social contracts of those societies have not yet changed relative to countries where that is no longer acceptable). Bottom line, for as long as one is part of a community (town, state, country, other), one is bound by the social contract for that community. In legal philosophy, formal legislation would be categorized as "high law" (institutionalized law) while a social contract would be categorized as "low law" (informal, implicit norms with the practical effect of legal regulation, if not the formal effect of such regulation).

Any community that reaches a certain size (the lowest number is often a matter of debate, but there is a consensus once it gets near four digits), throughout history, has created some form of governing order, sustained both by formal rules and the implicit social contract. Some even allow members of the community to express a preference (typically through voting). Where voting is part of the process, the typical outcome is majority rule (or, in the case of multiple parties, a coalition of groups that, together, constitute a majority). These representatives craft laws, guided by the implicit social contract, reflecting what they believe to be the will of the people who voted for them (it's not a 1:1 correlation, but democracy is messy). As they have term limits, they can be voted out (a common occurrence in many countries).

So, if one doesn't like the current setup, they can vote for someone who matches their views. But if that does not lead to a majority, then that means trying again. If one especially does not like the current setup and want change, it is incumbent upon them to try to persuade others to join them in making changes (option 2 above, or option 3). In the meantime, they are bound by things the way they are, not the way they would like them to be. Among the things that do exist (again, in many countries) are a variety of public services (military, health care, road systems and other infrastructure, education, police, firefighters, various safety and regulatory agencies, etc.). These exist to varying degrees of "intensity" (e.g., single-payer health care in the UK and Canada; mix of private and public, yet universal, health care in most European countries, as well as other parts of the world; non-universal mix of private and public in the US and some other countries, etc.) and with varying degrees of public support (e.g., public support for military institutions in most countries that have them AND allow political expression varies widely and often not in line with actual expenditures by the governments for their respective militaries--including the US). All of these things have one thing in common--taxes to support them. In countries that have elections, people get to select among parties that support more of their views than others (there is no perfect correlation). But not winning an election does not render the opposite viewpoint criminal. The fact that I disagree about A) some of what my governments do with my tax dollars and B) that the party I voted for didn't win does NOT mean that the taxes are "stolen from me". I am bound by the social contract of my community in which the government systems (municipal, provincial, federal) evolved. Moreover, I benefit from many of the services, either directly or indirectly (having a legal system that is robust and predictable, as well as largely fair [no system is perfect], for example, makes life in my country far better for everybody--and without taxes, it would not exist; same applies to a vast number of things). I am free to work at making the system different and more to my liking--it does not mean the current system is illegitimate because I do not always agree with it.

 

So it's a system that I had no choice in, that's imposed on my by force, and I have nowhere to escape from it, yet it's a voluntary social construct. How does this not make you guffaw?

That's right. What means that taxes are stolen from you is that they were taken from you against your will by threat of force. There is literally no way to define this away, philosophically speaking. You just have to acquiesce to theft being "ok" when the mob is called "government" and not ok when the mob isn't government. If voting was the magic elixir, then a band of crooks could elect to rob you and as long as you were allowed to cast your 'no' vote it would no longer be illegal.

 

"Thor angry! You stop tell Thor no steal from you or you go away! You no use things Thor buy with your money."

I don't understand why statists get so angry when confronted with such fundamentally basic facts.

It's not a philosophy that I'm being robbed, it's an actual fact. The only way it's not an actual fact is if the definition of theft is different. I'm still waiting for someone to post a definition that works so that taxation isn't theft. Nobody's even tried yet.

Living life according to facts as they are will always be more rewarding, financially and spiritually, than living a life tangled in a web of deception.

 

You have a choice. You can move to where the system is in line with your beliefs, or have income below the taxable level. You aren't forced to stay, or make more. If you do choose to stay and make more, your income was at least indirectly possible by the systems paid for by taxes.

You get something with taxes. Mainly in a stable society that allows to make a living without the extra expense of goods and services one would need in an anarchist state.

You get nothing with theft. There is no exchange of services when the thief takes your property.

 

"Alternative facts" ?
I guess you live in blissful ignorance. Enjoy.

 

at the end of the day, we live in a society created by humans. it will never be perfect, and even two people never agree all the time.
everything is compromise, and have laws that try to force some people to color within the lines. without them, we have lord of the flies

 

The social contract is NOT voluntary except in the sense that you can choose to remove yourself entirely from the community in which you currently live, either to another one more in line with your beliefs or to a marginalized hermit-like existence (though that is much more difficult in the 21st century than it was in the 19th or earlier).

Do you really believe a country of 350 million people can function in the absence of government? Of course it can't (nor can any smaller community unless it is smaller than a few hundred people). Show me the historical evidence that suggests otherwise. I can wait.

Now that we've dispensed with the fantasy, all governments require funds to operate. In many cases, historically and presently, people have little to no say about how governments acquire these funds or how they choose to use them. However, in the case of the US (and, to be fair, many other countries), people do have a say, however imperfect that say might be (pesky thing about reality--it's imperfect).

Do you have a job? Do you have a binding contract with your employer to receive payment for services rendered/labour provided? Do you have access to legal redress if you are not provided with that compensation? Better thank the tax man. Without him, no funds for a legal system, no way to redress a wrong by your employer in a civilized manner.

Do you own a home? Do you have a firefighter service in your town? Better thank the tax man. Without him (even with volunteer firefighters, in the vast majority of cases), no equipment to help you. And the firefighter will go to you without asking if you've paid your bill to the firefighter--because it's a public service (one that you could not personally afford alone--hence the social contribution made by fellow citizens via taxes as part of the social contract). Or maybe you live in a place without public services. In that case, sucks to be you (unless you're one of the very fortunate with lots of money).

Taxes are collected to fund services from which you benefit (if I robbed you of money at gunpoint, that would be theft as you would get nothing in exchange). Sometimes you benefit directly. Sometimes you benefit indirectly (and that's usually the sticking point for the "taxation is theft" crowd--if it's not always a direct benefit, it's "theft"). Well, I'm sure if you look hard enough, you'll find a society that has set up rules (motivated by its implicit social contract) that align with that point of view. It may require moving (as it did for me when I chose to move to a place where access to medical care is a right and owning a handgun is a privilege, rather than the other way around where I originally come from--See? It's possible to find a place that fits better with one's views.).

You'd have a point if the tax man took money from you and you received nothing in return. You certainly have the right to complain about what government does with the tax money. I complain about what my government does with mine (though I strongly suspect I complain about very different things than you do). But I'm not being "robbed" by the government just because taxes exist--and neither are you.

 

pretty sure joe's on it

 

This is incorrect. Tax credits come off in a specific order starting with the non-refundable ones. The EV credit is very high on the list and is taken off BEFORE the CTC.


iPhone ?

 

This is not correct. The credits come off on a specific order starting with the non-refundable credits. The EV credit is rather high on the list and comes off BEFORE the non-refundable portion of the CTC.

21.6.3 Credits | Internal Revenue Service


iPhone ?

 

Here is more on that topic from the IRS website.

21.6.3.4.1 (10-01-2019)
Nonrefundable Credits Procedures
Nonrefundable credits are applied in the order that they appear in this section, unless stated otherwise in the specific credit section, form instructions, or publication:

Form 1116, Foreign Tax Credit (Individual, Estate or Trust)
Form 2441, Child and Dependent Care Expenses
Schedule R, Credit for the Elderly or the Disabled
Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
Form 8880, Credit for Qualified Retirement Savings Contributions
Form 5695, Residential Energy Credits (the line 30 amount from Part II)
Form 8910, Alternative Motor Vehicle Credit (personal part of the credit)
Form 8936, Qualified Plug-In Electric Motor Vehicle Credit
*Credit for Other Dependents
*Child Tax Credit
Form 8396, Mortgage Interest Credit
Form 8839, Qualified Adoption Expenses
Form 8859, Carryforward of the District of Columbia First-Time Homebuyer Credit
Form 5695, Residential Energy Credits (line 15 amount)
Form 8834, Qualified Electric Vehicle Credit
Form 3468, Investment Credit
Form 5884, Work Opportunity Credit
Form 6478, Biofuel Producer Credit
Form 6765, Credit for Increasing Research Activities
Form 8586, Low-Income Housing Credit
Form 8826, Disabled Access Credit
Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit
Form 8845, Indian Employment Credit
Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
Form 8820, Orphan Drug Credit
Form 8874, New Markets Credit
Form 8881, Credit for Small Employer Pension Plan Startup Costs
Form 8882, Credit for Employer-Provided Childcare Facilities and Services
Form 8900, Qualified Railroad Track Maintenance Credit
Form 8864, Biodiesel and Renewable Diesel Fuels Credit
Form 8896, Low Sulfur Diesel Fuel Production Credit
Form 8906, Distilled Spirits Credit
Form 8907, Nonconventional Source Fuel Credit
Form 8908, Energy Efficient Home Credit
Form 8910, Alternative Motor Vehicle Credit
Form 8911, Alternative Fuel Vehicle Refueling Property Credit
Form 5884-A, Credits for Affected Disaster Area Employers or Certain California Wildfires
Form 8844, Empowerment Zone Employment Credit
Form 8941, Credit for Small Employer Health Insurance Premiums
Form 8994, Employer Credit for Paid Family and Medical Leave
Form 8847, Credit for Contributions to Selected Community Development Corporations
Trans-Alaska Pipeline Liability Fund Credit, claimed on Form 3800, General Business Credit
Form 8912, Credit to Holders of Tax Credit Bonds
Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts
Note: * CTC and ODC should be applied to tax only after the nonrefundable credit that appear before these credits on the tax return or appropriate schedule. This is done to help the taxpayer maximize their amount of credit.

These nonrefundable credits are:
Subtracted from the tax amount.
Limited to the amount of the tax liability.
Used before refundable credits.


iPhone ?

 

You are wrong, the American Rescue Plan Act that passed in March made the CTC for tax year 2021 fully refundable. The order of credits on the IRS web page has not been updated for tax year 2021.

Looking ahead: How the American Rescue Plan affects 2021 taxes, part 2 | Internal Revenue Service

2021 Child Tax Credit Stimulus And Advance | H&R Block

Child Tax Credit 2021: Advance FAQs & Calculator - NerdWallet

 

That may be true, but non-refundable credits still come off first before refundable credits. Even with CTC being fully refundable, the EV credit would still come off first.


iPhone ?

 

I am not a tax expert, and I have not had refundable tax credit on my tax return for many years now ever since our kids finished college, so I have no personal record to prove or disprove your statement. But can you direct me to a reference that states that non-refundable credits come off before refundable credits? If it really does that would be great for many taxpayers who have both non-refundable credits and refundable credits to claim. But I have read some people claiming just the opposite happening to their tax returns. That is, .gov takes refundable credits before the non-refundable credits, so that in effect not allowing the refunds to be maximized.

 

This is from the IRS site that discusses tax credits….

21.6.3 Credits | Internal Revenue Service

It specifically states in regards to non-refundable credits the following (#3 being the most important to this discussion)….

These nonrefundable credits are:
1. Subtracted from the tax amount.
2. Limited to the amount of the tax liability.
3. Used before refundable credits.


iPhone ?

 

Thanks for the link. Yep, that looks definitive, at least for the tax year that code was applied. I am glad to see that .gov is allowing the taxpayers to maximize the refundable credit amount in case he/she also has non-refundable credit to claim.

 

Turbo Tax has the example in the last part of this FAQ
https://www.google.com/amp/s/turbotax.intuit.com/tax-tips/tax-deductions-and-credits/what-is-the-difference-between-a-refundable-and-a-nonrefundable-credit/amp/L5ZBHTL5Y

Putting it all together
To illustrate how these credits work, assume that your 2020 tax return reports $2,400 of tax before taking the Child and Dependent Care and American Opportunity credits used in the examples above. You first reduce the tax by the $1,700 of nonrefundable credits you claim ($500 for the Child and Dependent Care Credit, plus $1,200 for the American Opportunity Credit). This brings your tax bill down to $700 ($2,400 - $1,700). You then reduce the $700 by the $800 refundable portion of your American Opportunity credit. This not only eliminates the entire $700 of tax, but also gives you a $100 tax refund for the excess.

Remember, when you use TurboTax to prepare your taxes, we’ll ask you simple questions, determine which credits you qualify for, and handle all the calculations to determine what’s refundable and what’s not.

 

Yeah, I use TurboTax, so I never do the calculation myself. Since the order of credit applied against the tax liability is already programmed into the TurboTax, it is never clear to the user what order the credit was applied to. However, as I commented, I don't qualify for any refundable tax credit, so this question was never a concern for me.

In the example above, if the order was refundable credit first, then the taxpayer would not see the $100 refund check.

$2,400 - $800 refundable portion = $1,600 remaining. Then applying $1,700 non-refundable credit would eliminate the tax liability to zero, but no refund.