How Exactly Will The Tax Credit Work

Please note that those in CA that get the state $5K will most likely be required to claim it as taxable income, so it's not really $5K after you pay taxes on it.

I could see residents of CA paying sales tax on the whole amount of the car, but I thought the state rebate was exactly that, a rebate on money I've already paid for the car. If they taxed the rebate, wouldn't that be double-taxing? Of course, nothing would surprise me

Randy

Randy said:

I could see residents of CA paying sales tax on the whole amount of the car, but I thought the state rebate was exactly that, a rebate on money I've already paid for the car. If they taxed the rebate, wouldn't that be double-taxing? Of course, nothing would surprise me

Randy

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Just like the solar rebates, they need to be claimed as income. There is a difference between sales tax and income tax of course.

Does anyone know if the tax credit for the charger carries over? That's where I could loose out, if it doesn't.

EVDRIVER said:

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.

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As a teacher, my salary is low enough that there's NO WAY I'll ever come close to paying $7500 in federal taxes in a single year... not even half that.
However, a tax credit is a tax credit -- I can't really complain about the government incentivizing me to purchase an EV just because rich people are incentivized more.

-Steve

earther said:

As a teacher, my salary is low enough that there's NO WAY I'll ever come close to paying $7500 in federal taxes in a single year... not even half that.
However, a tax credit is a tax credit -- I can't really complain about the government incentivizing me to purchase an EV just because rich people are incentivized more.

-Steve

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I'm not sure whether it is just income tax or income tax + payroll taxes.

evnow said:

earther said:

As a teacher, my salary is low enough that there's NO WAY I'll ever come close to paying $7500 in federal taxes in a single year... not even half that.
However, a tax credit is a tax credit -- I can't really complain about the government incentivizing me to purchase an EV just because rich people are incentivized more.

-Steve

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I'm not sure whether it is just income tax or income tax + payroll taxes.

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I was curious about that- if it applies to any federal taxes I may do some creative IRA flipping or capital gains stuff if needed. Could be interesting. I'm going to research this.

EVDRIVER said:

Please note that those in CA that get the state $5K will most likely be required to claim it as taxable income, so it's not really $5K after you pay taxes on it.

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I would double check that. Just like people thought the "Cash for Clunkers" cash was to be treated as taxable income. It wasn't. It was a lie spread by extreme right-wing whack jobs hoping for the failure of the program so that Obama would look bad.

chijayhawker said:

EVDRIVER said:

Please note that those in CA that get the state $5K will most likely be required to claim it as taxable income, so it's not really $5K after you pay taxes on it.

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I would double check that. Just like people thought the "Cash for Clunkers" cash was to be treated as taxable income. It wasn't. It was a lie spread by extreme right-wing whack jobs hoping for the failure of the program so that Obama would look bad.

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I will research this but this comes from the state, all the solar rebates are taxable, the utility rebate, city rebate all had to be claimed as income The funniest part of the rebate is that they require your to return a pro-rated amount divided by 36 months if you sell the car before that time period has elapsed. Good luck with the CA DMV tracking that, and then if they could they are going to come after you? Funny rule.

I agree with EVDRIVER, I'm quite certain the rebate is legally income. As such, it is taxable unless Congress (for the IRS) or the State Legislature (for CA FTB) passes a law to exclude it.

It is also true that you must return a pro-rated amount if you sell the car, terminate the lease, or leave the state, within 36 months. I don't see that it would be hard to track (except possibly the "leave the state" part), since the vehicle must be registered with the CA DMV before you can even apply for the rebate, and must remain registered in CA during the three years.

... Of course actually collecting the excess rebate after you have disappeared could be more difficult. But you might be a very unhappy camper if they do catch up with you, since you would have signed a legal agreement that you would notify them of any change of address.

I had my tax person process the rebate as if I bought in 99 with the correct form filed, I file as a sole proprietor and the unused portion carried over to 2010 so there may be some opportunities for carry over. I will need to check for 2010 filings, and if there is a way to maximize the rebate I will find it and let everyone know.

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

sjfotos said:

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

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It is not refundable.

sjfotos said:

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

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It's not only unrefundable, but you can't carry over the unused portion to the next tax year either.

leaffan said:

sjfotos said:

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

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It's not only unrefundable, but you can't carry over the unused portion to the next tax year either.

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SOme may be able depending on how they file but for most it will not.

leaffan said:

sjfotos said:

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

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It's not only unrefundable, but you can't carry over the unused portion to the next tax year either.

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Yes, that is what I am assuming, but I went to get it confirmed. I believe you are correct.

sjfotos said:

leaffan said:

sjfotos said:

I sat down and talked with my accountant today. He was quite aware of the program and had filed returns this past year for the $7,500 credit. He is going to do some research on 2010 and get back to me. He was unsure if the $7,500 tax credit was 'refundable' or not. "Refundable" would meant that you would get money back in a refund, even if you did not have sufficient taxes paid to apply the $7,500 against the tax liability. He thought it was not refundable, but he also observed that there is an increasing number of these programs in recent years that are. I am sure I will hear back shortly and will post here when I do.

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It's not only unrefundable, but you can't carry over the unused portion to the next tax year either.

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Yes, that is what I am assuming, but I went to get it confirmed. I believe you are correct.

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I had it ran through an accounting system and filed a return based on the 2009 return rules. I also go t carry over to 2010 but that is under business expenses.

Is there any reason someone couldn't lease the car and then buy out the lease immediately (refinance into a loan)?

Although I guess you'd be stuck paying full interest on the lease (minus any down payment you could come up with) - you'd get the full $7500 tax credit immediately, which would be greater than the interest.

Here is a brief summary of what I obtained from my accountant. Note: This is not tax advice, as each taxpayer has a different situation, but is offered as general feedback that I got.

1. The program is a tax credit, not a rebate, etc. You need to have sufficient tax liability of $7,500 or more in the year of purchase to use this fully.
2. The tax credit is not 'refundable'. This means that if you do not have the $7,500 in tax liability, you will not get the difference in a cash tax refund. This is unlike the Home Buyer's program that expired last week. If you did not have sufficient tax liability, they would still send you a check for the difference.
3. The tax credit itself cannot be carried over from year to year.
4. The tax credit is applicable when you file your return for the tax year. That means there will be a gap between your purchase of the vehicle and any benefit you receive.

As I find out any additional details, I will post.

This is the form: http://www.irs.gov/pub/irs-pdf/f8936.pdf

Also, here are the terms of the EVSE tax credit: http://www.afdc.energy.gov/afdc/laws/law/US/351

IRS form for EVSE credit: http://www.irs.gov/pub/irs-pdf/f8911.pdf