IRS Form 8936 - Qualified Plug-In Electric Drive

As long as the tax credit stays viable in 2017, a good solution. But who knows? We don't burn enough oil.

 

this question hasn't been correctly answered in 10 years.

 

Bob you have been "using" your new Prime as an example of how to purchace a vehicle out of state. Isn't that a service?

Best I could find in a saved pdf
Line 11. Date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in -4Instructions for Form 2106 (2016)

We discused this tax thing and W4 adjustments awhile back but I'm on the little screen right now so not easy to search.

 

Bob- Congrats on the Prime I am happily shocked I thought we lost you to BMW.
I think I'd be tempted to take the credit in 2016 if I bought in 2016, but I suspect you are OK either way.

What you're talking about I think is fiddling around with your 2017 tax withholding so you don't get a huge tax refund at the end next year. That's sort of fine tuning, you would get the credit either way, but sure helps the cash flow.

 

I don't get it. You bought the car in 2016 so why not claiming 2016 tax credit? Did you buy the car in a state while living in another state so the "in service" means in service in your own state? I am confused.

 

I will say the "in service" clause is within the federal realm so whichever sate you have acquired the car's possession as compared to the state of your domicile, the car is considered to be "in service" at the moment you obtained possession.

 

they still have 5 in stock, that's pretty good.

 

That's amazing that the Prime is so cost effective, perhaps sales will be good indeed.

Federal tax credit just depends on taxes owed FORM 1040 Line 56, so withholding does not figure into the credit. Although changing withholding would allow you to not over pay and then get a big refund. I recommend folks try a sample calc in TurboTax.

 

iirc, Bob refers to them as financial advisor Critters. .

 

"The problem is you don't get a refund on a tax credit. So it is a delicate balance, reducing the withholdings so the normally owed tax are completely offset by the tax credit."

The credit reduces the tax liability but will not reduce the liability below zero--the balance of the credit will be lost. The BMW was purchased used so it does not qualify for the credit. The withholdings will cover the balance of the tax due and you'll receive a refund sometime in 2017.

Your scheme would work if you planned for the purchase and reduced your withholding in 2016. Adjust the withholding in 2017 because you expect a change in your 2017 income not because you purchased a Prime in 2016.

 

Case 1:
Let's say you owe $4500 taxes, and you have $4500 withheld

Tax Owed $4500
Tax Withheld $4500
Prime Credit $4500
Tax Refund $4500 is because you overpaid taxes (too much withholding)

Case 2:
Let's say you owe $4500 taxes, and you have $0 withheld

Tax Owed $4500
Tax Withheld $0
Prime Credit $4500
Tax Refund $0 is because you planned in advance to reduce withholding.

In both cases, you qualify for the Prime tax credit.
These are revenue neutral cases.

The important thing is that you manage your income to actually owe $4500 taxes (before the credit is applied). You want to have have some income in the year you are claiming credits. For retired folks that could mean pulling some taxable IRA money out or something like that, if your income is lower.

 

mostly correct. There's a one-year carry over provision. So any credit you can't use in the first year you can carry over one more year. So even if you can't use any the first year - you can manipulating withholdings to use all of it in the next year.
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...really? I missed the carry-over allowance as a possibility.

Why is everyone talking withholding? Withholding has nothing to do with the EV tax credit, except cash flow management timing, it does impact.

 

Missed it, as in didn't use it? Or, didn't see it within the tax code. One caveat. We used the carryover 5 years ago on our Ev. I wouldn't swear the provision is still there without checking.
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In the real world, I have not purchased any Plug-ins.
But in TurboTax, I have done many sample calcs of EV purchases. I think I even bought a Tesla in Turbo Tax.
You do need a VIN Number in TurboTax, but any VIN will do!