Disappointed in my tax refund results with $7500 EV credit.

[juanmedina]

Not quite true. You can split the credit over multiple years. We had to do that this year because our tax liability was only $4k. A good accountant will know how to handle it.

is this BS or not? I would really like to know. My parents bought a model 3 and they retired and they don't have much tax liability.

 

[caskater47]

is this BS or not? I would really like to know. My parents bought a model 3 and they retired and they don't have much tax liability.

As most have pointed out this is likely not true and I simply misunderstood my accountant.

 

[happyzod]

FYI. Under the new tax law 1099 income is the only way to get deductions anymore. If you're doing it right the 1099 income will give you an even bigger refund. I suggest you hire an accountant for next year. My accountant has saved me tens of thousands of dollars over the years.

HSA. 401k. 403b. 457. Traditional IRA. Student loan interest. Short term capital gains loss.

 

[MXWing]

Folks, declaring whatever you want on the tax return is not the problem.

ITS JUSTIFYING WHAT YOU DECLARED IN THE EVENT OF AN AUDIT IS THE PROBLEM.

A creative accountant tends to have ALL of their returns audited once a few turn up fishy.

Anyone who tries to carry over the EV Tax credit, I would be pushing 0-60 away from in about 3.5 seconds..

 

[mhan00]

As most have pointed out this is likely not true and I simply misunderstood my accountant.

You might want to check your returns yourself or at least ask your accountant to clarify things for you, just to be sure. If the IRS audits you, they won’t accept “My accountant told me it was okay” as an excuse. A BS carryover of the tax credit on its own wouldn’t be a huge deal (you could just pay the penalties out of pocket, most likely), but if it’s just one of many BS things your accountant has been doing over the years, then things could be much more serious

Edit - maybe have another accountant look over your returns just to make sure everything is kosher.

 

[voip-ninja]

You might want to check your returns yourself or at least ask your accountant to clarify things for you, just to be sure. If the IRS audits you, they won’t accept “My accountant told me it was okay” as an excuse. A BS carryover of the tax credit on its own wouldn’t be a huge deal (you could just pay the penalties out of pocket, most likely), but if it’s just one of many BS things your accountant has been doing over the years, then things could be much more serious

When interviewing prospective accountants I have found that a good question to ask is "I'd like to write off my home office". A red flag for me would be an accountant that says "sure, how many square feet is it?".

 

[voip-ninja]

if you don't have $7500 in tax liability how can you afford a tesla?

You need to spend more time on Audi/BMW/Merc forums where the prevalence of people who spend more on car payment + insurance than they do on mortgage or rent is at epic levels.

At the top of the scale are the ones who work ho hum lowish paying job, own $85,000 car, and live with Mom & Dad at age 30.

Free country so people can do whatever they want but I'm surprised by the raised eyebrows I get when I tell millennial age co-workers that putting 10% of their income away in a 401K is a far cry away from being enough to retire on some day.

 

[happyzod]

When interviewing prospective accountants I have found that a good question to ask is "I'd like to write off my home office". A red flag for me would be an accountant that says "sure, how many square feet is it?".

Home office and miles for travel are big red flags. I agree!

 

[mongo]

You need to spend more time on Audi/BMW/Merc forums where the prevalence of people who spend more on car payment + insurance than they do on mortgage or rent is at epic levels.

At the top of the scale are the ones who work ho hum lowish paying job, own $85,000 car, and live with Mom & Dad at age 30.

Depending on your region, it is not extreme to have a car loan bigger than a house loan:
House: 30 year fixed mortgage 4% interest $477 per month per $100k financed
Car: 5 year 0% loan $477 a month per $28,600 financed
So a 200k house costs the same (ignoring taxes) as a $57,200 car. And combined they are sub $2k a month. Using a 30% debit to gross income ratio: that would put earnings at $80k or so...

Doesn't mean I like paying that much for a car though...

Home office and miles for travel are big red flags. I agree!

Much easier with a detached garage...

 

[caskater47]

Home office and miles for travel are big red flags. I agree!

As a self employed individual any accountant that tells me I can't deduct a home office or travel miles is a red flag.

 

[voip-ninja]

As a self employed individual any accountant that tells me I can't deduct a home office or travel miles is a red flag.

I never said you can't write it off, just what the reaction of the accountant is to the question. There are major repercussions for doing so to the point that in some cases it's not worth it. Any accountant that does not go into excruciating detail about what will be involved in that home office write-off from a depreciation perspective (section 1250 gain) when the home is eventually sold is not doing their job in my opinion.

If an accountant does not go into some detail about this stuff they are best case a crummy accountant and worse case an incompetent one that could end up with you getting slapped hard by the IRS.

 

[MXWing]

When interviewing prospective accountants I have found that a good question to ask is "I'd like to write off my home office". A red flag for me would be an accountant that says "sure, how many square feet is it?".

That is a valid deduction if the accountant at least ask "is this space exclusively for your business that is not a hobby?"

You need to spend more time on Audi/BMW/Merc forums where the prevalence of people who spend more on car payment + insurance than they do on mortgage or rent is at epic levels.

At the top of the scale are the ones who work ho hum lowish paying job, own $85,000 car, and live with Mom & Dad at age 30.

Deeply in debt but ostentatious.

(adj.) Giving the appearance of wealth through purchase and use of flashy items such as expensive cars, jewelry, clothes, or other trendy items, without having much money (ie, every expensive item is financed.) The items purchased are "the real thing" but the individual buying them lacks the sufficient income/net worth to truly comfortably afford the items. The individual is usually tapped out financially but due to the items purchased, appears to the general public be wealthy.

 

[voip-ninja]

Depending on your region, it is not extreme to have a car loan bigger than a house loan:
House: 30 year fixed mortgage 4% interest $477 per month per $100k financed
Car: 5 year 0% loan $477 a month per $28,600 financed
So a 200k house costs the same (ignoring taxes) as a $57,200 car. And combined they are sub $2k a month. Using a 30% debit to gross income ratio: that would put earnings at $80k or so...

Doesn't mean I like paying that much for a car though...

Real cost in home ownership is substantially higher than that when you tack on homeowner's insurance, property taxes, upkeep, etc. A home is an asset that generally appreciates over time even after upkeep costs.... a more desirable home in an upscale neighborhood can substantially appreciate, just ask anyone who had the foresight to buy up property in Laguna beach in the 1950s and 60s.

A car on the other hand is an asset that rapidly depreciates into peanuts unless it's a collector's item.

My own personal limit is that vehicle purchase payments should never exceed about 10% of monthly gross income, but that's just me, everyone has a different tolerance for debt and everyone has different priorities. The problem is when someone is spending 30% of their take-home pay on a car and doesn't acknowledge that financially it is a really poor decision to make.

 

[Glamisduner]

That's not accurate. The new law eliminates most categories of what classifies as a deduction for anyone that is a W-2 employee. That's why they increased the standard deduction amount to 24k. The wanted to get rid of "loopholes" and raise the standards deduction for everyone to offset the difference in hopes to not piss everyone off come April. Only that's a major problem for someone like me with lots of unreimbursed business expenses. Working as a 1099 makes me self employed and therefore able to recoup all the costs I previously had under the old law.

To put it simply, under the old law as a W2 employee I may have had 40k+ in deductions to reduce my tax liability. Under the new law that gets chopped down to about 15k thus making the standard deduction apply and losing nearly 20k in deductions.

The only people who win under the law are business owners and sole proprietors.


It's also possible I misunderstood what my accountant told me as well.

Standard deduction is 12k per person not 24k. But if your married and your wife does not work this can be great if you file jointly.

 

[VT_EE]

if you don't have $7500 in tax liability how can you afford a tesla?

Ask Donald Trump. I assume the reason he won’t release his tax returns is because he has paid little or no tax.

 

[Evoforce]

You need to spend more time on Audi/BMW/Merc forums where the prevalence of people who spend more on car payment + insurance than they do on mortgage or rent is at epic levels.

At the top of the scale are the ones who work ho hum lowish paying job, own $85,000 car, and live with Mom & Dad at age 30.

Free country so people can do whatever they want but I'm surprised by the raised eyebrows I get when I tell millennial age co-workers that putting 10% of their income away in a 401K is a far cry away from being enough to retire on some day.

They are just going to live at home until parents keel over and inherit all their hard earned assets. Never having to move or work hard. Who is smarter?

 

[mongo]

Real cost in home ownership is substantially higher than that when you tack on homeowner's insurance, property taxes, upkeep, etc. A home is an asset that generally appreciates over time even after upkeep costs.... a more desirable home in an upscale neighborhood can substantially appreciate, just ask anyone who had the foresight to buy up property in Laguna beach in the 1950s and 60s.

A car on the other hand is an asset that rapidly depreciates into peanuts unless it's a collector's item.

My own personal limit is that vehicle purchase payments should never exceed about 10% of monthly gross income, but that's just me, everyone has a different tolerance for debt and everyone has different priorities. The problem is when someone is spending 30% of their take-home pay on a car and doesn't acknowledge that financially it is a really poor decision to make.

Sure, long term fiscally, cars are not an investment (but then neither was my first house -25% ), but my point was that in a pure dollar expense POV, having a car payment over your house payment is not necessarily bad, especially if the total for both is low enough (my example was 30% for both house and car),.

I preferred my car payments when they were under $250 a month, but I'm guessing the Tesla pickup will be a tad more than that...

 

[dww12]

is this BS or not? I would really like to know. My parents bought a model 3 and they retired and they don't have much tax liability.

If you are retired perhaps you could move a large sum of money (out of an IRA) that would incure a tax liability, use the credit then put the money in a savings accout and not have any tax for the next few years.

 

[cpa]

When interviewing prospective accountants I have found that a good question to ask is "I'd like to write off my home office". A red flag for me would be an accountant that says "sure, how many square feet is it?".

My response varies among, "Why?" or "Really? Tell me more." or "Do you understand the complexity of this deduction?" The one I choose will be dependent upon how I obtained this client, and what this client does. Clearly, a self-employed person with a dedicated office built above the garage, or an outbuilding on his property for his beekeeping supplies and honey extractor is an easy deduction.

I never said you can't write it off, just what the reaction of the accountant is to the question. There are major repercussions for doing so to the point that in some cases it's not worth it. Any accountant that does not go into excruciating detail about what will be involved in that home office write-off from a depreciation perspective (section 1250 gain) when the home is eventually sold is not doing their job in my opinion.

If an accountant does not go into some detail about this stuff they are best case a crummy accountant and worse case an incompetent one that could end up with you getting slapped hard by the IRS.

Hear! Hear! Exactamundo. More times than not the tax savings (if we follow the rules punctiliously) are peanuts compared to the taxes owed upon sale or exchange. In addition doing this calculation increases my fee $$ each year . When taxpayers insist, I then ask them for quarterly digital photographs emailed to me that show exactly how their "home office" is arranged so that there is no question that the space is not used for personal purposes other than incidental storage.

Forty years of PUWTS has told me that there is a substantial subset of the population that learns tax saving techniques at the local watering hole or from trusted friends who boast what "their guy" has deducted off their taxes. Never mind that these friends may be misinformed themselves or that their facts and circumstances are much different.

The $7,500 EV credit is only allowed against your regular tax, and there is no carryover with one exception: If the credit is claimed as a business credit, then the unused business portion may be carried over to be claimed in subsequent years. A vehicle used 80% for business will realize a general business credit of $6,000 and a personal credit of $1,500. If a taxpayer's income tax liability for the year before credits is $1,200, then the personal credit is lost and there will be a $4,800 general business credit carryforward.

Just to make things clear: The BEV credit does not offset other taxes assessed on one's tax return. Only Chapter 1 taxes.

 

[voip-ninja]

Sure, long term fiscally, cars are not an investment (but then neither was my first house -25% ), but my point was that in a pure dollar expense POV, having a car payment over your house payment is not necessarily bad, especially if the total for both is low enough (my example was 30% for both house and car),.

I preferred my car payments when they were under $250 a month, but I'm guessing the Tesla pickup will be a tad more than that...

I will reiterate that having a car payment higher than a house payment is always bad, in my opinion, source? 20+ years of buying homes and cars.

If you can afford a $800 a month car payment and have a $600 a month mortgage then you should drive a cheaper car and buy a better house. Your net worth in 20 years time will greatly thank you.