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Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 2:46 pm
by mwalsh
sjfotos wrote:garygid, I believe you are correct. I will be checking on Thursday to post here.
Steve
I definitely need the skinny on that. I thought you could carry any excess to the following year.

With respect to what Rat said, I believe you only owe penalties on taxes owed IF you also had to pay owed taxes with your return the previous tax year. Again, double check with your tax adviser. But I play this game every year, although this year I did goof up to the tune of about $2000 (long story), so I need to be SUPER CAREFUL this year.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 3:06 pm
by EVDRIVER
sjfotos wrote:garygid, I believe you are correct. I will be checking on Thursday to post here.
Steve

I have read the credit does not forward- the terms are listed on the IRS site I believe. This credit then only favors individuals in certain income brackets. Seems a bit discriminatory.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 3:22 pm
by sjfotos
Thank you EVDRIVER. That would be the information we were looking for, at least for the carry-forward part. Thanks again.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 4:35 pm
by mwalsh
sjfotos wrote:Thank you EVDRIVER. That would be the information we were looking for, at least for the carry-forward part. Thanks again.
Then I guess it will be Leaf this winter and PV system next year for me (or vice-versa depending on how Nissan chooses!).

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 4:40 pm
by EVDRIVER
sjfotos wrote:Thank you EVDRIVER. That would be the information we were looking for, at least for the carry-forward part. Thanks again.

The IRS form I read says it must be used in full in the year of purchase. Too bad.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 6:40 pm
by LEAFfan
sjfotos wrote:I have not read the applicable law, but happen to be meeting with my accountant on Thursday, so i will bring back his opinion after that meeting.

In the interim:

A tax credit generally means that you receive a deduction off your taxes (federal in this case, unless you also have a state program). In other words, you do not receive the cash up front. What you get is a reduction in the taxes that you owe for that year. You either get that in a refund or in a reduced payment, depending upon how much in taxes you owe. In the worst case, you would buy something on January 1st of one year and not be able to get the credit until the subsequent year's filing.

Note that if you owe less than $7,500 in federal taxes, you don't gain anything from a tax credit because you did not owe the government anything in the first place. This is different than a tax rebate or a grant, in which you typically receive a check at, or shortly after, purchase.

Tax credits are paid to the owner of the purchased asset. For this reason a Nissan dealer cannot give you the $7,500. If you buy the asset, you are the one who must clam it. This is different than the lease option. In this case the Nissan Credit company owns your car and can give you the value for the tax credit in the reduced leasing payments because as the owner of the purchased asset, they can claim the $7,500 credit. Since they would usually have a pretty substantial tax payment, they benefit.

In short, if you buy the car, you are likely to have to finance it at the actual pre-tax credit price. You can then claim the tax credit, get a refund (hopefully), and pay that refund into the car loan OR re-finance the loan at that time.

Note: I will try to confirm this on Thursday.
That is exactly right! You did an outstanding job explaining it to him. So people should realize that if they choose to 'buy', most will have to pay around $35-37K (including all the 'taxes, extras, and upgrades) up front, minus what they want to put down on the financing.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 6:48 pm
by sjfotos
Thank you leaffan, I was a little sloppy with using the word 'deduction', instead of 'reduction'. Also, I should have worded the part of owing less than $7,500 in tax would get you nothing. If you owed $5,000 in federal tax and you had that deducted through payroll or estimated tax payments during the year, you would get the $5,000 refund, but no more. The principal being that the federal government is not going to give you a refund on taxes you did not owe.

This, among several other reasons, is why I never went into tax accounting!

Fortunately, my accountant actually knows this stuff!

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 6:59 pm
by mwalsh
EVDRIVER wrote:The IRS form I read says it must be used in full in the year of purchase. Too bad.
Pretty well perfect for me....$7500 is roughly my year-on-year tax obligation!

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 7:28 pm
by Rat
mwalsh wrote:With respect to what Rat said, I believe you only owe penalties on taxes owed IF you also had to pay owed taxes with your return the previous tax year. Again, double check with your tax adviser. But I play this game every year, although this year I did goof up to the tune of about $2000 (long story), so I need to be SUPER CAREFUL this year.
I believe what you're thinking of is if you pay withholding+estimated taxes of at least 90% of what you owed the previous year, then I think you are not hit with penalties for underpayment in the current year, even if you are well below what you owe. But I think if you reduce your withholding to below that 90% figure this time around due to an anticipated credit and you misjudge the final amount owed, you can get hit with penalties. This is true even if you overwithheld last year and got a refund. I used to do taxes for a living, but the laws change all the time and I haven't kept up, so do not rely on me for this. I could be mistaken.

Re: How Exactly Will The Tax Credit Work

Posted: Tue May 04, 2010 7:34 pm
by Bicster
My plan is to trade-in my current car (I have about $13,500 of trade-in equity) and purchase the Leaf.

Then I will sell my 2nd car and buy a used minivan. I need a people hauler. When tax season arrives, I'll pay off the loan on the minivan with my tax refund.

Keep in mind that the tax credit for the EVSE works the same way. You'll pay the ~$2,200 to Nissan and you'll get a tax credit for 50% of that cost. That is in addition to the $7,500 credit for the car.

Offtopic: I really wonder what the EVSE will cost, because in my case the installation should only run $200-$300 at the most. I think the average install will be a lot more complicated than mine.