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garygid
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 12:43 pm

Simplified (not exact) Description:
When you figure your taxes, you have income items, and various deductions, resulting total taxable income. From that, you calculate your total tax liability.

Then you subtract this $7500 tax credit. If negative, your remaining total tax liability becomes zero. The result is your remaining tax liability. You might already have paid more or less than this amount.

So you then subtract the tax payments you already made (W2 withholding, any estimated taxes, etc.). The result, if positive, is the amount you still need to pay. If negative, it is the refund that the IRS owes you.

So, you need sufficient "Tax Liability" to benefit from this special EV "tax credit". The amount of taxes that you still owe (would still need to pay) is not important for this benefit.
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IBELEAF
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 1:01 pm

pcenginefx wrote:So then to make it plain and simple (just trying to be perfectly clear here):
1. Buy Leaf in 2011
2. File taxes for 2011
3. Receive $7,500 tax credit in the form of *cash refund* IF I am receiving a tax refund already
OR
If I owe the IRS extra money at tax time, the $7,500 is applied to my balance due.


Yes, that's basically sums it all up. At least that's what I've been told as well.
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garygid
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 1:05 pm

No, that is NOT correct.
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Gonewild
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 1:23 pm

You can not get the balance in a refund.

If you pay $6,000 in taxes and deduct the $6,000 from the $7,500 you get $6,000 and loose $1,500 of the $7,500. This make it a brake even on the lease.
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pcenginefx
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 1:36 pm

See, this is why I'm confused :)

The reason why I wanted clairifaction in the first place was that it was my understanding from reading this thread that unless you end up owing tax at tax-filing time, the $7,500 is worthless to a Leaf buyer. I am most likely expecting a refund for 2011 like I have over the past few years, so in this case I the Leaf tax credit does me no good....?

From the sounds of it, there seems to be still some ambiguity around how this exactly will pan out.

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Jimmydreams
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 1:37 pm

A refund, regardless of the amount doesn't figure into the Leaf $7,500 at all.

A refund means you gave the IRS too much money throughout the year. If you gave them $100, and your tax bill was $25 for the year, then you get a $75 refund because that is the amount you overpaid. If you gave the IRS $15,000 throughout the year and you owe $12,500 in taxes, you would get a refund of $2,500. What you need to know is what is your tax liability for the year?? Do you pay $10 in taxes or $10,000 in taxes? THAT is where the $7,500 tax credit for the Leaf comes in.

If you only owe $2,000 in taxes, then when you subtract the $7,500 Leaf tax credit, you would get credit for the $2,000 you normally would owe, and you would LOSE THE OTHER $5,500 FROM THE LEAF CREDIT. It is only a credit, not a rebate....there is a difference. You only get the full $7,500 if you pay over $7,500 in taxes.

If, however, you owe $10,000 in taxes, you subtract from that the $7,500 from the Leaf and now you only owe $2,500 for the year. If you had $12,000 withheld throughout the year, your refund would be $9,500 ($7,500 from the Leaf credit, and $2,000 from what you overpaid)

Your refund is simply predicated by how much you have withheld vs how much you owe. The Leaf $7,500 is applied only against how much you OWE, and only UP TO $7,500. If you LEASE a Leaf, however, Nissan 'gives' you credit for the entire $7,500 as if you put that in as a down payment. So if you owe less than $7,500 in taxes, leasing is a way of getting all of the $7,500 that you otherwise wouldn't have.

Clear as mud? :mrgreen:
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pcenginefx
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 2:10 pm

OK! I think this is finally making sense now! So tell me if this scenario looks right:

Federal tax owed for 2010: $25,000
Leaf Tax Credit: $7,500
TAX DUE: $17,500

Withholdings from paycheck: $26,000
REFUND: $8,500

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wsbca
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 2:12 pm

pcenginefx wrote:See, this is why I'm confused :)

The reason why I wanted clairifaction in the first place was that it was my understanding from reading this thread that unless you end up owing tax at tax-filing time, the $7,500 is worthless to a Leaf buyer. I am most likely expecting a refund for 2011 like I have over the past few years, so in this case I the Leaf tax credit does me no good....?

From the sounds of it, there seems to be still some ambiguity around how this exactly will pan out.


Several others have spelled it out pretty clearly...but to re-re-re state it:

There's no ambiguity if you know how much tax you pay. Tax filing time and whether you are ahead or behind in your ultimate payment due to the Feds on that date have NOTHING to do with it. Just because your withholdings from each paycheck are set up such that you typically get a tax refund has NOTHING to do with it. Do you pay federal income tax? My guess is yes - we don't know how much, but you do - look at your tax return. Up to 7,500 of that tax, for the year in which you buy the car, can be returned to you in the form of this credit.

Try it this way: how much is deducted from your pay, total for the year? How much do you expect your refund to be? (that represents overpayment of taxes during the year - if it's a big number you might be having too much withheld from your pay, you might as well get that money earlier by not having it withheld, but that's a personalized calculation and decision). If the amount withheld from your pay exceeds your refund, you paid income tax. If that amount of income tax is $7500 or more, then generally speaking you should get $7500 back. If it's less than $7500 you'll only get that much back. The credit reduces your taxes. Again, your refund, or the check you write on April 15th are just adjustments to arrive at you having paid the right amount of tax - those amounts are not directly relevant.
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wsbca
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 2:12 pm

pcenginefx wrote:OK! I think this is finally making sense now! So tell me if this scenario looks right:

Federal tax owed for 2010: $25,000
Leaf Tax Credit: $7,500
TAX DUE: $17,500

Withholdings from paycheck: $26,000
REFUND: $8,500




Yep (if your tax picture is otherwise the same for 2011, when you'll be buying the car)
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Re: How Exactly Will The Tax Credit Work

Wed Jan 19, 2011 2:18 pm

OK, everybody - pull out your standard IRS 1040 form from 2009 (I don't know about you, but I haven't done my 2010 taxes yet). You do have that handy at all times, right? ;)

For this exercise, we're going to assume that EVERYTHING about 2010 (or, well, 2011 for most of us) is the same as what happened in 2009. Obviously this is wrong, but.. it's the best I can do:

  • So on a standard 1040 form from 2009, line 60 is your "total tax" for 2009.
  • Take the value from line 60, and subtract $7,500 from it [LINE60 -7500] . If the result is negative, then make it 0.
  • You have now calculated the amount of tax you owe the government for 2009. Call this TAXOWE
  • Box 71 has how much you already paid the government in taxes in 2009.
  • Subtract TAXOWE from the value in box 71 [LINE71-TAXOWE]
  • If the answer is positive, that is the refund you would have gotten on this magical 2009-as-2010-or-2011 year.
  • If the answer is negative, that is the amount you would have had to pay on this magical 2009-as-2010-or-2011 year.

Again, this is assuming the tax code for 2010 or 2011 was the same as 2009, that you made the exact same amount in 2009, collected the exact amount of interest in 2009, etc. This number you've come up with is NOT what you will get back/owe for 2010 or 2001, but it at least gives you a VERY broad idea of what you might get back/owe.

If I have this wrong, please correct me - but this is my understanding of it. I don't know if this is easier or harder than how others have explained it already.

(Of course, in the time it took me to compose this message, pcenginefx now has got it. But... I'm posting this anyway, just in case it helps anyone else)

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