How Exactly Will The Tax Credit Work

[planet4ever]

I have read every post on this thread, and am still confused as to the full value of the $7500 credit. The two 2009 IRS forms I have each mention a credit of UP TO $7500, and the 8834 "Qualified Plug-in Electric and Electric Vehicle Credit" seems to specifically limit the credit to $2500 per vehicle, but allows three vehicles which would equal $7500. The 8936 mentions a "tentative credit" but does not state the amount. I think it may refer to the IRC 30D list, which does state $7500, but in completing a draft of that form, other variables knock that down considerably. Am I missing something? Exactly which IRS Form would a new Leaf owner use to get the maximum deduction, assuming using the long 1040 form itemizing dedcutions?

8834 is the wrong form. You can't use it for the LEAF. 8936 is the correct form, and yes, the LEAF qualifies (tentatively) for $7500. Tentative just means that's the credit you get if other factors don't knock it down. Whether you itemize or not has nothing to do with it. Since you say it was knocked down considerably I assume that means either that your total tax liability will be less than $7500 or that you expect in addition to get tax credits from forms 1116, 2441, 8863, and/or 8880.

If you are counting on multiple tax credits you might see if you can move one or more of them into a different year.

[charlie1300]

I would encourage anyone who is unclear on their tax status at this point in the discussion to use a name brand software package like turbo-tax, or have their taxes done by a CPA. It's a shame that that our tax code is so complicated, and tax payers have to spend money just to pay their taxes.

[solarchargeddriver]

A point that hasn't been addressed in this thread yet: will the tax credit apply against the Alternative Minimum Tax?!

I actually found a FAQ page on the IRS site that indirectly said that yes, it would, for all tax years 2009 and onward (sorry don't have the link handy here), but I wish I had a more definitive answer...

Really? I heard to the contrary.

As far as my own withholding strategy, I also plan on a PV system, and either I'll get the PV system, the car, or both, this year. So, being as the tax credits for the PV system can be carried over (until 2016), all ways round I should be good for credits which eliminate my tax liability for the next 3-4 years.

Edit: Answer to Gonewild's question about carrying over PV system tax credits in sentence above.

But how are you going to know how many allowances to take in each year, and, as some have pointed out, how can one anticipate this if one doesn't have any idea in what year one will actually have a LEAF to purchase, for instance, in a place like Colorado (where we are)?

And, yes, our situation is similar to that of many others here: It's complicated by the fact that we had a home solar system installed in June 2010, and probably didn't take near enough withholdings for 2010, although, luckily the federal tax credit on renewable/energy efficiency measures can be carried across years, in contrast to EV tax credits, and the EV-charging station tax credit.

Given the importance, and complexity, of the EV tax credit issue, it's a shame that there isn't more good, solid information out there about it, in the media, etc.

[IBELEAF]

I am still unclear. Let say you bought the car, used it for a few month, realized that it's not for you and sold it. Can you still claim the tax credit or not? Is there anything in regards to this in the fine print?

[mgoleta]

Form 8936 applies to IRC 30D, Qualified Plug-in Electric Drive Motor Vehicle Credit
www.irs.gov/pub/irs-pdf/f8936.pdf

The LEAF qualifies under IDC 30D
http://www.irs.gov/businesses/article/0 ... 06,00.html

I believe the initial purchaser is entitlted to the credit unless you initially pruchased it for resale as a result a subsequent buyer is not not entitled to the credit. Form 8936 instructions require "The original use of the vehicle began with you". You should read form 8936 instructions carefully.

On the other hand if you are in CA and claimed the CA $5K rebate, you would have to give part or all of it back, as you are required to own the vehicle for 36 consecutive months as a condition of the rebate.
https://energycenter.org/index.php/ince ... tions-cvrp

[pcenginefx]

Ok I just want to verify what I've learned about the tax credit - if any of the below are NOT true, please correct me.

- If I decide to BUY the Leaf this year (2011), I will receive a $7500 tax credit upon filing my taxes for 2011.
- If I do NOT owe anything on my taxes for 2011, then the $7500 tax credit is useless and will not help me in any way.
- If I LEASE the Leaf, then the $7500 tax credit is deducted from the dealer price of the car and will help reduce monthly payments on the car.

Thanks for the clarification…this is really confusing.

-Aaron

[wsbca]

[quote="pcenginefx"
- If I do NOT owe anything on my taxes for 2011, then the $7500 tax credit is useless and will not help me in any way.
[/quote]

This might be totally obvious, but your language "owe anything on my taxes" leads me to point it out....there's a distinction between "owing" at tax time, and having a tax burden which you may have already mostly or entirely satisfied, or exceeded, through payroll deductions. The credit is against your total tax burden. So you may be in line to receive a refund (of some portion of your taxes already paid), and get still more back from this credit, up to your total burden for the year.

[pcenginefx]

Thanks for your response wsbca. For example, we have no kids but own a house and a condo which we rent out. Last year we received a tax refund of about $2,500. So to benefit from the $7,500 tax credit for this year we will need to deduct less from our paycheck so that we owe more during tax time (which in turn we can apply the $7,500 tax credit to what we will owe the IRS). Is this correct?

[IBELEAF]

Thanks for your response wsbca. For example, we have no kids but own a house and a condo which we rent out. Last year we received a tax refund of about $2,500. So to benefit from the $7,500 tax credit for this year we will need to deduct less from our paycheck so that we owe more during tax time (which in turn we can apply the $7,500 tax credit to what we will owe the IRS). Is this correct?

No, you don't need to make any changes, assuming you owe more then $7500 in taxes throughout the year, you'll get the full credit amount. So let say you paid 10k in taxes for the year and was due to get $2500 refund, so you'll be getting $2500 + $7500 = $10k.

[pcenginefx]

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.