[VoltFish]

I'm hoping somebody here is familiar with the tax credit both for vehicle purchase and for charging station installations.

Here's my understanding:
1. A tax CREDIT is applied directly to the tax owed to reduce your tax liability. It differs from a tax DEDUCTION, as a deduction just lowers your taxable income rather than directly lowering your tax liability.
2. A tax credit can only lower your liability to $0 maximum. It cannot create a negative tax liability (and thus a refund).

I'm confused on #2. It seems like if I pay taxes throughout the year out of my paycheck and don't owe any extra money at the end of the year then I should still be able to take the credit against the taxes I paid.

For instance, let's say I paid $10,000 in taxes throughout the year and after doing all the other tax forms I show a tax liability of $5000 for the year. I won't owe anything extra because I paid the $10,000 throughout the year already, and I will be getting a $5000 refund. I still expect to be able to apply the EV credit to this since I still owed money for the year, I just already paid it. So in this case I would expect the $7500 credit to apply and then I would have a total tax liability of $0, yet I already paid $10,000, resulting in a $10,000 refund (only $5000 of the $7500 credit would be used since the credit can't lower the tax liability to below $0). Is this how it works? It seems like my tax software is not applying the credit at all even though my tax liability was still above $0 after other deductions and credits.

 

[scrambler]

The fact that you prepay your taxes does not affect your credit.

The key term here is tax liability, not tax balance

As long as your tax liability is more than $7500, you can take the credit.

If you had prepaid taxes so that your tax balance was zero or less than $7500, you will get a refund.

 

[VoltFish]

The fact that you prepay your taxes does not affect your credit.

The key term here is tax liability, not tax balance

As long as your tax liability is more than $7500, you can take the credit.

If you had prepaid taxes so that your tax balance was zero or less than $7500, you will get a refund.

Right... That's my understanding (and logically how it should work)... I guess I need to look closer in the tax software and see where something isn't working out correctly.

 

[Joe67]

Right... That's my understanding (and logically how it should work)... I guess I need to look closer in the tax software and see where something isn't working out correctly.

I suggest consulting your tax professional if you still need clarification after reviewing your tax software for the best results.

 

[caronjeff]

Just for example take a look at your last years return. The line where it clearly states " your tax" if it's $10,000 you credit $7,500 and only owe $2,500. If " your tax" is $5,978 for example then your credit is $5,978 and you owe $0. If you've paid in withholding you get a big refund. If your buying a Volt now, change your withholding for 2017 to have a minimum as possible taken out if your pay, as you will be getting most of it back.

 

[saghost]

For instance, let's say I paid $10,000 in taxes throughout the year and after doing all the other tax forms I show a tax liability of $5000 for the year. I won't owe anything extra because I paid the $10,000 throughout the year already, and I will be getting a $5000 refund. I still expect to be able to apply the EV credit to this since I still owed money for the year, I just already paid it. So in this case I would expect the $7500 credit to apply and then I would have a total tax liability of $0, yet I already paid $10,000, resulting in a $10,000 refund (only $5000 of the $7500 credit would be used since the credit can't lower the tax liability to below $0). Is this how it works? It seems like my tax software is not applying the credit at all even though my tax liability was still above $0 after other deductions and credits.

Yes, that's how it should work. Things like AMT can screw with it, though.

 

[tattoogunman]

I always wondered about this credit as well and wonder how many people it actually benefits. Take me - we always get money back at the end of the year, so if I were to buy a new Volt and be eligible for the $7500 credit, it would do me zero good (unless I'm not understanding something) because it's not like that $7500 is added on top of my existing refund.

That's why I don't quite understand the huge emphasis I see placed on EV pricing where you have a car that costs $40K or more and then they say "well, it won't actually be a $40,000 car because you can subtract off the $7500 dropping its price to $32,500" when it's not - it's still a $40,000 car and you're only benefiting if you owe money at the end of the year. If it was truly subtracted off of the price of the car up front, I could see the benefit. As it is, I really don't see the point of it. Are the state credits used the same way or are they actually subtracted off the price up front??

 

[llninja]

Right... That's my understanding (and logically how it should work)... I guess I need to look closer in the tax software and see where something isn't working out correctly.

In 2014 when I was using H&R Block (a.k.a tax cut in a previous life) they did not have the requisite form built in, so I had to download the form, fill it out, and manually enter it on the back side of the 1040 form in the software. Apparently turbotax had the form in the interview questions and will guide you. Look at IRS form 8936 and it should show you how much you can claim. Then when you put this on the back of 1040, you check box C, type in 8946, then add $7500 to that line. When you subtract that fro, your liability, if your liability was greater than $7500, you are golden and should get a big refund.

So if you are filling out forms now for a car purchased last year, get ready for a big check. But like another person,posted, if you are planning to buy an EV in 2017, you can change your withholdings from work to withhold zero until you have an extra $7500 in your pocket, then turn your withholdings back on. No need to give Uncle Sam a zero interest loan for well over a year (and also don't blow this extra money on a bass boat or a dining room set)

 

[saghost]

I always wondered about this credit as well and wonder how many people it actually benefits. Take me - we always get money back at the end of the year, so if I were to buy a new Volt and be eligible for the $7500 credit, it would do me zero good (unless I'm not understanding something) because it's not like that $7500 is added on top of my existing refund.

Yes, the $7500 would be added to your existing refund, assuming you'd paid at least that much more over the year that the government would have otherwise kept.

 

[Henry_FL]

The form is in Turbo Tax, easy peazy to enter in the info.

 

[tattoogunman]

Yes, the $7500 would be added to your existing refund, assuming you'd paid at least that much more over the year that the government would have otherwise kept.

Ah OK, I had seen it said that you didn't benefit from it unless you actually owed money to Uncle Sam.

 

[TSquare]

Ah OK, I had seen it said that you didn't benefit from it unless you actually owed money to Uncle Sam.

Everybody (with an income) owes money to Uncle Sam. Most pay it with withholding from their paycheck. If you end up owing $7500, your Volt reduces that to $0 and you get all of your withholding back. If you owe more that $7500, your Volt reduces it by $7500. If you owe less that $7500, your Volt reduces it to $0. You can not owe negative $.

 

[skiflyer]

Does the EV credit require itemization or can it stack on the standard deduction? Not relevant for me this year, but I'm assuming the answer to that question is to a lot of people.

Sent from my Nexus 6P using Tapatalk

 

[llninja]

Does the EV credit require itemization or can it stack on the standard deduction? Not relevant for me this year, but I'm assuming the answer to that question is to a lot of people.

Sent from my Nexus 6P using Tapatalk

It's not a deduction (which reduces your income that is taxed). It is a full-on tax credit. If you are in the 25% tax bracket, a deduction would pull $7500 off your income thus saving you 25% of $7500 or $1875 off of taxes. A tax credit pulls $7500 off of your tax liability, if your tax liability was greater than or equal to $7500. But if your tax liability was $5000, then it would pull $5000 off your taxes so you owe $0.

While we're on the topic of deductions, I'm always fascinated that people (financial advisors too) try to keep their mortgage interest deductions. Using the 25% tax bracket example, why in the world would you pay a bank $1000 in interest to save $250? I'd much rather pay Uncle Sam $250 to avoid paying the bank $1000. In the same vein, I'd love to be paying Uncle Sam millions in taxes as that means I'm making much more than millions.

 

[Mister Dave]

The key term here is tax liability, not tax balance

Correct.

As long as your tax liability is more than $7500, you can take the credit.

A better way to say this is that you cannot claim more than your tax liability. If your tax liability is only $4000, then that's all your credit will be.

A tax CREDIT is applied directly to the tax owed to reduce your tax liability. It differs from a tax DEDUCTION, as a deduction just lowers your taxable income rather than directly lowering your tax liability.

Tax deductions are subtracted from your gross income, while tax credits are subtracted directly from the amount you owe.

If that helps you understand the difference.

 

[wordptom]

I'm hoping somebody here is familiar with the tax credit both for vehicle purchase and for charging station installations.

It seems like my tax software is not applying the credit at all even though my tax liability was still above $0 after other deductions and credits.

The tax credit for purchasing an electric car is obtained by filing Federal Form 8936 with your taxes. Not all tax filing software includes the form - if memory serves me, Form 8936 is included in TurboTax, but not in H&R Block. Form 8936 for tax year 2016 is currently available on the IRS website, so check your tax software to see if the current form is included there.

I’m not familiar with which form is needed for the energy credit that comes with installing a charging station, but that credit, too, is related to a Federal Form that might or might not be included with your tax software package.

 

[llninja]

The tax credit for purchasing an electric car is obtained by filing Federal Form 8936 with your taxes. Not all tax filing software includes the form - if memory serves me, Form 8936 is included in TurboTax, but not in H&R Block. Form 8936 for tax year 2016 is currently available on the IRS website, so check your tax software to see if the current form is included there.

I’m not familiar with which form is needed for the energy credit that comes with installing a charging station, but that credit, too, is related to a Federal Form that might or might not be included with your tax software package.

The year I got my volt tax credit, I hit some threshold with AMT that knocked me out of getting the 30% charging station credit. Had I known what was going to happen, might have held off a few months to get the EVSE the next tax year, but then I wouldn't have been able to predict my state suspending their EVSE and EV rebate programs. Every year I get all riled up on why the tax codes need to be so complicated. Flat percentage tax off of everyone's income with no other deductions and credits anyone? Everyone pays 20-25% of what they make.

 

[Mister Dave]

I’m not familiar with which form is needed for the energy credit that comes with installing a charging station....

IRS form 8911, referred to as the Alternative Fuel Infrastructure Tax Credit. More info here: https://www.irs.gov/credits-deductions/individuals/alternative-fuel-vehicle-refueling-property-credit

Clipper Creek has an excellent state EVSE tax credit/rebate information page: https://www.clippercreek.com/evse-rebates-and-tax-credits-by-state/

 

[Loboc]

The form is in Turbo Tax, easy peazy to enter in the info.

I used TT as well. However, the form needed was only in the deluxe version.

TT was able to do the EVSE credit as well.

Texas doesn't have income tax, so, they did the $2500 alt fuel as a direct grant. Sent me a check. This program is expired.

 

[snic]

I always wondered about this credit as well and wonder how many people it actually benefits. Take me - we always get money back at the end of the year, so if I were to buy a new Volt and be eligible for the $7500 credit, it would do me zero good (unless I'm not understanding something) because it's not like that $7500 is added on top of my existing refund.

Just to make sure the incorrect information in sentence above gets clarified: Actually, it is exactly the case that the $7500 is added to your "existing" refund, assuming (a) you have more than $7500 in tax liability, and (b) you didn't reduce your paycheck tax withholding.

Every year I get all riled up on why the tax codes need to be so complicated. Flat percentage tax off of everyone's income with no other deductions and credits anyone? Everyone pays 20-25% of what they make.

That would greatly reduce the ability of the government to incentivize certain behaviors (e.g., buying an electric car) and to facilitate spending on various items that would otherwise be difficult for many people to afford (e.g., buying a house, childcare).