7500 tax credit

[SabrToothSqrl]

I'm sure this has been asked 1,000 times, but now I'm thinking between a used S85D and a new X75D.

The new X would qualify for a tax rebate... but I only paid $5400 in federal last year.

So, that means I get back $5400 of the $7500? does it carry over to next tax year (I assume not).

thanks :-[

 

[kort677]

yes I believe that it can be carried forwards

 

[ChadS]

Sabr, you correct that it is a tax credit, so if you don't have the whole tax liability (which is the total tax you owe FOR the whole year, not the as-yet-unpaid portion of that tax you may happen to owe AT THE END of the year which is subject to how you set your withholding), you can't take it all. One of several problems with its design.

It can not be carried forward. I missed out on the 2012 credit because an unusual tax situation that year, and there was no way to carry the credit forward.

 

[Super_Popular]

I am I the same boat as you. I have never gotten the full $7500.

I say get the 75D verses the S

 

[kort677]

I stand corrected, the tax credit cannot be carried over.

 

[engle]

I stand corrected, the tax credit cannot be carried over.

Sometimes businesses can carry credits or unused deductions forward whereas individuals cannot. I don't know if this is true in this case or not.

 

[gmtom1]

Keep in mind, that with proper planning, there are more than a few ways to accelerate or defer taxable income from one year to another in order to not lose the $7500 benefit, depending on the situation.

 

[Diavel]

Keep in mind, that with proper planning, there are more than a few ways to accelerate or defer taxable income from one year to another in order to not lose the $7500 benefit, depending on the situation.

Can you elaborate a little please so I can extrapolate some information from you? I have lots of deductions this year and will all get wasted if I don't learn to either accelerate or defer taxable income.

 

[gmtom1]

Can you elaborate a little please so I can extrapolate some information from you? I have lots of deductions this year and will all get wasted if I don't learn to either accelerate or defer taxable income.

It depends on your situation. A easy was to adjust your income would be to temporarily reduce your 401k withholdings. You'll also want to adjust your W-4 amount too, so that your net pay is approximately the same and you avoid giving the feds an interest free loan.

Another option may be to take a look at your investment portfolio and harvest some gains. Yet another option, depending on your employer, may be to accelerate receipt of your 1st month's paycheck into the current year. Advance payments are generally considered income upon receipt.

 

[MattXowner]

Would love some insight. How can you afford a $100k car and not have enough taxable income to take advantage of the $7500 credit? What am I doing wrong? Wrote the IRS a big check this year. Love that it will be $7500 less next year.

 

[Diavel]

Would love some insight. How can you afford a $100k car and not have enough taxable income to take advantage of the $7500 credit? What am I doing wrong? Wrote the IRS a big check this year. Love that it will be $7500 less next year.

I'm not an accountant and am fairly new at this. However my understanding is that there are plenty of reasons where this can happen.

multi-millionaire with no income or financing the vehicle with a hefty down payment and not have income with $7500 worth of deductions to name a couple.

In my situation I haven't made sufficient income this year to use up all the tax deductions that I project to have. I have quite a bit of deductions this year and they're piling up and I'm also in the process of starting another business which I don't foresee even generating the revenue needed to fully take advantage of more credits, deductions and rebates.

I'm in California and Sec. 179 (tax relief for small businesses) is limited to $25,000 with no bonus depreciation. In another state that allows more, I think deductions or deductible asset is up to $500,000 or even $2,000,000 (not entirely sure on that one as it doesn't relate to me) on top of bonus depreciation of 50% in addition to standard yearly depreciation as well as the federal tax credit of $7500. That's quite a bit to take advantage off especially if you purchase more equipment due to a new business; such as computers, copiers or even X-ray machines where you have a 2 year ROI expectation so you may not be generating the income necessary for full credit.

 

[gmtom1]

If you can claim the X as a business asset and depreciate it, it's heavy enough to qualify for the "hummer" $25k bonus depreciation for federal purposes, but the credit is limited to $2500 for business use of a vehicle. A net operating loss from deductions can be carried back to offset prior income and get a refund, however I don't think the reduced $2500 credit can be carried forward.

If you have business deductions lowering your income, then perhaps look into paying some December 2016 expenses late in 2017 (if you can). Generally, expenses must be paid by March 15th of the following year to be deductible.

 

[Diavel]

If you can claim the X as a business asset and depreciate it, it's heavy enough to qualify for the "hummer" $25k bonus depreciation for federal purposes, but the credit is limited to $2500 for business use of a vehicle. A net operating loss from deductions can be carried back to offset prior income and get a refund, however I don't think the reduced $2500 credit can be carried forward.

If you have business deductions lowering your income, then perhaps look into paying some December 2016 expenses late in 2017 (if you can). Generally, expenses must be paid by March 15th of the following year to be deductible.

Your saying if 179 is claimed, then the $7500 federal tax credit is brought down to $2500? This is the first I've heard of this.

 

[chloedog]

couple of points, and I'm not an accountant, this is just my understanding

- section 179 is a federal thing not a state thing. My understanding is that vehicles are limited to $25k in all states. The $500k limit is for other types of business equipment.

- if your vehicle is for personal use then $7500 is limited to your tax liability. If you don't owe enough taxes then you lose a portion of the $7500 credit that's unused. But if your vehicle is for business purposes then the unused portion can be carried forward or backward.

 

[Diavel]

couple of points, and I'm not an accountant, this is just my understanding

- section 179 is a federal thing not a state thing. My understanding is that vehicles are limited to $25k in all states. The $500k limit is for other types of business equipment.

- if your vehicle is for personal use then $7500 is limited to your tax liability. If you don't owe enough taxes then you lose a portion of the $7500 credit that's unused. But if your vehicle is for business purposes then the unused portion can be carried forward or backward.

Well there is a difference. One thing I am sure about is that bonus depreciation does not apply in all states which is big. I also believe that it is not $25000 in all states.

 

[Diavel]

 

[chloedog]

Well there is a difference. One thing I am sure about is that bonus depreciation does not apply in all states which is big. I also believe that it is not $25000 in all states.

Oh yeah I think bonus depreciation is limited in CA (and it is huge) but the 179 capital expenses deduction is 25k everywhere I thought.

 

[Diavel]

 

[chloedog]

That image you posted is for business equipment. Heavy vehicles get special treatment and is limited to 25k.

Search for suv here Instructions for Form 4562 (2015)

 

[Diavel]

Oh yeah I think bonus depreciation is limited in CA (and it is huge) but the 179 capital expenses deduction is 25k everywhere I thought.

Bonus depreciation is not limited in California. It is not recognized at all. All types of businesses have a total $25,000 tax deductible so that's not even the end capital reduction. So taxes saved is much less than that. Truly frustrating.

Looks like you are right about the 25k. *thumbs up emoji*

First image was typical business and second is on passenger vehicles.