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Electric car tax credit
Old 12-26-2017, 10:05 AM   #1
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Electric car tax credit

Correct me if i'm wrong. My understanding is that the electric car tax credit is non refundable. That means you only get to reduce your federal tax liability by the amount of your actual taxes owed up to $7500. You can't get a refund beyond what you owe. In 2018 I expect to make the most income i've ever made at somewhere over 50K depending on the amount of overtime I work. Say I make $52,000. $12K is standard deduction so no tax. Approx. $10K is taxed at 10% then the remaining $30K is taxed almost entirely at 12% for a total tax liability of around $4600. That means I only get a tax credit of ~$4600. It seems the car manufacturers price the cars with the full tax credit in mind making it a bad buy for someone like me. It's only good for the higher income people who go into the 22% bracket. So no full tax credit for the majority of people. Do I have this right? Maybe I should buy a Prius Prime which has a tax credit of $4500. I may be able to get that full amount if I only put enough into my 401K for a full match.
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Old 12-26-2017, 10:15 AM   #2
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I believe you have it correct.

Another wrinkle is that AFAIK it's only a credit against taxes you owe when you file, so if you go this route you would want to minimize your withholding throughout the year so you owe as much as possible.
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Old 12-26-2017, 10:19 AM   #3
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I believe you have it correct.

Another wrinkle is that AFAIK it's only a credit against taxes you owe when you file, so if you go this route you would want to minimize your withholding throughout the year so you owe as much as possible.
That would make it completely not worth it. Maybe i'll just buy a regular Prius or Camry Hybrid.
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Old 12-26-2017, 10:26 AM   #4
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I believe you have it correct.

Another wrinkle is that AFAIK it's only a credit against taxes you owe when you file, so if you go this route you would want to minimize your withholding throughout the year so you owe as much as possible.
Please look into that if you're going to rely on that information. I've never seen a tax credit work that way. Usually what you owe is considered the tax liability before any payments are considered. I've seen credits where you can't get back more than your tax liability, but I've never seen one that considered your refund/payment situation after withholding.
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Old 12-26-2017, 11:35 AM   #5
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You're probably right, Jerry1.
I don't remember where I read that, and it seemed odd to me too. I should have researched it before posting.
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Old 12-26-2017, 03:00 PM   #6
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I just bought the new generation 2018 Camry Hybrid. Don't know that we will ever get our $4k hybrid option out of the fuel savings, but we absolutely love the quietness and power of the completely new engine and hybrid system.

We just got in from Florida and was getting 47.4 mpg at 80 mph cruise. In town, we are getting 52 mpg using the battery more than the engine.

The car had a $29k window sticker and we paid under $27k from a non-chain dealer. Although it has all the bells and whistles, the Camry still cost car less than the average new vehicle cost of $32k. The retail market is quickly going to SUVs, and they are all very heavy and much less efficient than sedans. We already have a Ford Explorer people hauler that is a great vehicle.

Electric vehicles and especially hybrids are the vehicles of the future--tax credit or no tax credit.
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Old 12-26-2017, 03:09 PM   #7
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I just bought the new generation 2018 Camry Hybrid. Don't know that we will ever get our $4k hybrid option out of the fuel savings, but we absolutely love the quietness and power of the completely new engine and hybrid system.

We just got in from Florida and was getting 47.4 mpg at 80 mph cruise. In town, we are getting 52 mpg using the battery more than the engine.

The car had a $29k window sticker and we paid under $27k from a non-chain dealer. Although it has all the bells and whistles, the Camry still cost car less than the average new vehicle cost of $32k. The retail market is quickly going to SUVs, and they are all very heavy and much less efficient than sedans. We already have a Ford Explorer people hauler that is a great vehicle.

Electric vehicles and especially hybrids are the vehicles of the future--tax credit or no tax credit.
This is the car i'm leaning toward right now. I haven't started to physically try out any cars yet but I suspect that my very long legs wouldn't fit well into a Prius so hopefully they will fit in a Camry Hybrid much better. If necessary I may go with a Rav4 Hybrid. I do live in the snow belt afterall.
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Old 12-26-2017, 03:39 PM   #8
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Can't you carry over the credit to future years?
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Old 12-26-2017, 03:47 PM   #9
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Can't you carry over the credit to future years?
https://cars.usnews.com/cars-trucks/...ax-credit-work

The article at this link says no. However they do suggest doing a Roth conversion to create a tax liability if you don't already have a high enough tax liability. That's an option I hadn't thought of.
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Old 12-26-2017, 04:26 PM   #10
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This is the car i'm leaning toward right now. I haven't started to physically try out any cars yet but I suspect that my very long legs wouldn't fit well into a Prius so hopefully they will fit in a Camry Hybrid much better. If necessary I may go with a Rav4 Hybrid. I do live in the snow belt afterall.
Although they may be hard to find (depending on the market where you are looking I have seen numbers similar on the Chevy Malibu Hybrid. The Malibu is is large inside so try that out also. (you could for fit etc try a regular Malibu and if that works ok order the hybrid.) The hybrid is 49 city 43 highway, (I don't have the hybrid but do have a 2016 lt2 and am 6 ft 4 inches and fit well. The vehicle has a 1.8 l engine.
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Old 12-26-2017, 04:30 PM   #11
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Although they may be hard to find (depending on the market where you are looking I have seen numbers similar on the Chevy Malibu Hybrid. The Malibu is is large inside so try that out also. (you could for fit etc try a regular Malibu and if that works ok order the hybrid.) The hybrid is 49 city 43 highway, (I don't have the hybrid but do have a 2016 lt2 and am 6 ft 4 inches and fit well. The vehicle has a 1.8 l engine.
I'm over 6'6" and my legs are longer than average for someone my height. I often hear, "I'm 6'2 or I'm 6'4" and I fit fine", then I try and it's not even close. I'll keep that in mind though.
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Old 12-26-2017, 06:58 PM   #12
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This tax credit is applied against your tax liability before payments/withholding is considered. As long as your liability is $7500+ youíll get to use the whole credit. If it is less then you cannot reduce your liability below zero or carryover the excess. After the credit is applied, any excess withholding is refunded or applied to next year.

I think Iíve heard that if you lease a qualifying vehicle, the dealer will give you credit against the lease price for the full tax credit and then the dealer claims it back from the govít. Perhaps this would work better for you.

As an early adopter of an EV (2012 Leaf), in hindsight, I wish Iíd leased my car. The technology changed so much in the first 3 years, plus with battery degradation it probably would have been better for us....YMMV
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Old 12-26-2017, 07:23 PM   #13
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Prius Prime, great car, look to the northeast. Drove one back from NY in June; $2500 from Toyota, $1500 from dealer, $4502 from feds, and $5000 from CO! Even better incentives from Toyota/dealers of late in the NE

Fed credit wasn't revoked for next year
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Old 12-26-2017, 08:05 PM   #14
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The federal tax credit is also used to subsidize leases.

And state tax credits can also often be used towards leases.

E.g., if you live in California, there are some very attractive lease offers on the Chevy Bolt right now.
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