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evnow
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How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 10:39 am

We see some people post that they may not have $7,500 tax liability to benefit from 7.5K credit available to Leaf buyers. I was intrigued, just like many others, how would anyone who doesn't even pay 7.5K in taxes, be able to afford buying a $32K car.

I did some rough calculations on what a family/individual has to earn to have a minimum of $7,500 in tax liability.

I've taken 3 kinds of owners - people filing jointly (and have 2 children), people filing jointly (no children) and filing individually. In each of these cases I've listed two situations - one where the itemized deduction is higher than standard deduction available and the other where standard deduction is higher. Ofcourse, the income needed to have a minimum of $7,500 in tax liability varies depending on the exact itemized deduction - these are just some examples.

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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 10:46 am

Nice! Thanks. Each household's situation will be different ("YMMV" as we always say), but nevertheless a good "ballpark estimator". 8-)
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garygid
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 10:55 am

The "Taxible Income" line (after deductions) applies to essentially everybody.
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evnow
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 10:56 am

garygid wrote:The "Taxible Income" line (after deductions) applies to essentially everybody.
Yes - though different for filing jointly or as individuals.
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TimeHorse
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 1:32 pm

Ahhh, but what about... dun dun dun AMT. :-o

Either way, I pity the Californian family earning only 75k given the cost of living out there in general. Still, I think in the mid west there's going to be a lot of folks not taking full advantage assuming we still have this credit in place next year and they can get those "Autumn/ Winter 2011" ready before 2012!
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evnow
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 3:27 pm

TimeHorse wrote:Ahhh, but what about... dun dun dun AMT. :-o
7.5K credit is against AMT as well.

In anycase, what are the chances someone pays AMT but doesn't even have 7.5K tax liability ?
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AndyH
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 3:33 pm

Interesting numbers, evnow - a great look at an earned-income situation.

One thing that many folks might consider is not: how to make more money in order to have a higher tax liability in order to take advantage of the $7500 EV credit, but how to reduce their tax liability so that they don't have to pay as much tax year after year. That's MUCH more valuable than a $7500 credit.

Take advantage of the low stock market and buy a dividend bearing stock or three. Or start a small business. Or take advantage of the real estate market (amazing sales in progress!) and get a rental house. Each of these opens the door to tax benefits not available to wage earners that are much more valuable than the EV credit while also bringing one passive income that isn't taxed as highly as earned income.

Grab a copy of The Four Hour Work Week - or anything from Kiyosaki - or Carleton Sheets - or Dean Graziosi. Why work harder for money when it's so easy to have money working for you?

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DeaneG
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 4:01 pm

Err.. isn't rental income taxed exactly the same as "earned" income?
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EVDRIVER
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 4:17 pm

DeaneG wrote:Err.. isn't rental income taxed exactly the same as "earned" income?

Yes but you have expenses against it not to mention depreciation of the property.

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evnow
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Re: How much one should earn to get $7,500 tax credit ?

Sun Aug 01, 2010 5:01 pm

Rental property ?

http://www.bogleheads.org/forum/viewtopic.php?t=58255

I'm sure there are other threads there as well. If I really was bullish about real estate, I'd invest in the real estate ETF.

Effects of Peak Oil on rental property is a major unknown as well ....
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