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Federal Tax Credit may be coming back for Tesla purchases

doomsday997

Member
Jun 1, 2021
137
168
NY
Any link to this vote? If so, the $10k and $12.5k would not happen?
You can find it with a google search. It just means that it barely passed committee with zero GOP support pretty much ensuring it will be filibustered (if it even comes to a floor vote) and therefore DOA as it is now.
 

gavlois

Member
May 15, 2021
10
6
Oklahoma City
Soo, in order to get the credit you have to spend your entire year salary, and have tax of 7k in order to get then tax credit.... this seems really odd. No one would ever qualify?
As far as I understand it, it doesn't matter whether you get any tax refunds. As long as you owe more than 7k in federal taxes, you'll qualify for the full amount. So if your workplace deducts enough taxes that you owe none and get nothing back, you should just get the full amount back. You can talk to your CPA for a better idea with your specific situation.
 

doomsday997

Member
Jun 1, 2021
137
168
NY
As far as I understand it, it doesn't matter whether you get any tax refunds. As long as you owe more than 7k in federal taxes, you'll qualify for the full amount. So if your workplace deducts enough taxes that you owe none and get nothing back, you should just get the full amount back. You can talk to your CPA for a better idea with your specific situation.
As I understand it if you owe nothing in taxes you get nothing as it’s a non-refundable tax credit.

“You must have a federal tax liability in the year you purchase an electric car or plug-in hybrid to claim the tax credit. The tax liability must meet or exceed the amount of credit you're requesting. If, for example, you owe $6,000 in federal taxes, you can only claim a credit of $6,000 – even if the vehicle qualifies for a full $7,500 tax credit. It’s important not to confuse your federal tax liability with the size of the check you have to write by April 15, as your income tax liability also reflects any amounts withheld from your paycheck throughout the year.”
 

gavlois

Member
May 15, 2021
10
6
Oklahoma City
As I understand it if you owe nothing in taxes you get nothing as it’s a non-refundable tax credit.

“You must have a federal tax liability in the year you purchase an electric car or plug-in hybrid to claim the tax credit. The tax liability must meet or exceed the amount of credit you're requesting. If, for example, you owe $6,000 in federal taxes, you can only claim a credit of $6,000 – even if the vehicle qualifies for a full $7,500 tax credit. It’s important not to confuse your federal tax liability with the size of the check you have to write by April 15, as your income tax liability also reflects any amounts withheld from your paycheck throughout the year.”
What you said is exactly what I thought also. My employer already withholds all my taxes for me, as do so many other people, so that means almost no one actually qualifies? I'll be chatting with my CPA pretty soon so I will reply with an update afterwards.

I remember reading the article this came from. The way I understand it is that last sentence. You may owe e.g. $6000 in federal taxes but it doesn't matter that you've withheld enough from your paychecks. It is determined by how much you owe before you've paid, whether with a big check during tax season or from your withheld amounts. The non-refundable part is that if you owe less than $7500 in a single year you can't get the leftover or have it carry over to the next year. So in this case, only up to $6000 and you lose the other $1500.
 

doomsday997

Member
Jun 1, 2021
137
168
NY
What you said is exactly what I thought also. My employer already withholds all my taxes for me, as do so many other people, so that means almost no one actually qualifies? I'll be chatting with my CPA pretty soon so I will reply with an update afterwards.

I remember reading the article this came from. The way I understand it is that last sentence. You may owe e.g. $6000 in federal taxes but it doesn't matter that you've withheld enough from your paychecks. It is determined by how much you owe before you've paid, whether with a big check during tax season or from your withheld amounts. The non-refundable part is that if you owe less than $7500 in a single year you can't get the leftover or have it carry over to the next year. So in this case, only up to $6000 and you lose the other $1500.
Yes please ask and tell us what you’ve found! As it was explained to me there is “refundable” tax credits meaning you will get an actual refund for the full amount if you owe nothing, but a non refundable credit like the current EV credit only erases any taxes you owe up to 7500, it does not give you a refund
 

bob_p

Active Member
Apr 5, 2012
3,706
2,815
Here's the link: EV Tax Credit

Tesla customers would lose $2500 of the credit because they aren't using union workers.

Since the bill passed on a 14-14 vote in a 50-50 senate, unlikely the bill, at least as written, will go anywhere.
 

Jughead135

Member
Feb 19, 2020
204
90
Georgia
My employer already withholds all my taxes for me, as do so many other people, so that means almost no one actually qualifies?

Do not confuse withholding amounts with your tax obligation. The amount your employer withholds is an approximation (a variation on estimated taxes) derived from IRS tables: if you have X pay periods per year for Y dollars each, your total tax due will be Z. That will come pretty close if all of your pay is identical, if you have no other income, if your filing status doesn't change, if you don't qualify for any tax credits, if, if, if.... In other words, again: it's an approximation.

That's why you typically get a refund or owe additional taxes when you file. If you have a total tax obligation of $10,000, and your employer withheld $12,000, you get a $2,000 refund--but your total tax obligation is still $10,000 (you paid it all in advance, plus $2K over, via withholding). If your employer withheld $8,000, you will have to write a check for the $2,000 when you file--but your total tax obligation is still $10,000 (of which you've already paid $8,000 via withholding).

For a non-refundable credit of $7,500 (which is what I understand this to be), it's your total tax obligation that matters: the credit will reduce that total, but not below $0 (some credits are "refundable," meaning if the credit exceeds your total tax obligation you can get money "back" that you never actually paid in). How much is withheld (or paid via estimated taxes or prior years' refunds or any other method) is not relevant.
 

doomsday997

Member
Jun 1, 2021
137
168
NY
Here's the link: EV Tax Credit

Tesla customers would lose $2500 of the credit because they aren't using union workers.

Since the bill passed on a 14-14 vote in a 50-50 senate, unlikely the bill, at least as written, will go anywhere.
This exactly. Anyone who really wants a tesla should not pin their hopes on this bill.
 

doomsday997

Member
Jun 1, 2021
137
168
NY
Do not confuse withholding amounts with your tax obligation. The amount your employer withholds is an approximation (a variation on estimated taxes) derived from IRS tables: if you have X pay periods per year for Y dollars each, your total tax due will be Z. That will come pretty close if all of your pay is identical, if you have no other income, if your filing status doesn't change, if you don't qualify for any tax credits, if, if, if.... In other words, again: it's an approximation.

That's why you typically get a refund or owe additional taxes when you file. If you have a total tax obligation of $10,000, and your employer withheld $12,000, you get a $2,000 refund--but your total tax obligation is still $10,000 (you paid it all in advance, plus $2K over, via withholding). If your employer withheld $8,000, you will have to write a check for the $2,000 when you file--but your total tax obligation is still $10,000 (of which you've already paid $8,000 via withholding).

For a non-refundable credit of $7,500 (which is what I understand this to be), it's your total tax obligation that matters: the credit will reduce that total, but not below $0 (some credits are "refundable," meaning if the credit exceeds your total tax obligation you can get money "back" that you never actually paid in). How much is withheld (or paid via estimated taxes or prior years' refunds or any other method) is not relevant.
So am i correct in understanding that with a nonrefundable credit like the 7500, you can only get credit if you owe correct? If you owe nothing you get nothing. If you get a refund normally you also get nothing. Am i correct in this understanding?
 

cusetownusa

Member
Jan 29, 2020
531
877
Syracuse NY
So am i correct in understanding that with a nonrefundable credit like the 7500, you can only get credit if you owe correct? If you owe nothing you get nothing. If you get a refund normally you also get nothing. Am i correct in this understanding?

Only if you owe federal taxes. If you somehow pay $0 federal taxes, then yes, you wouldn't get any of the $7,500.
 

Jughead135

Member
Feb 19, 2020
204
90
Georgia
So am i correct in understanding that with a nonrefundable credit like the 7500, you can only get credit if you owe correct? If you owe nothing you get nothing. If you get a refund normally you also get nothing. Am i correct in this understanding?

How are you using "owe" in this context...?

If your total tax obligation is less than $7,500, then you will get a credit up to (but not exceeding) that amount. If it's $0, you get zero. If over $7,500, then the credit is $7,500. This all assumes you otherwise qualify for the full $7,500 credit. This is true of any non-refundable credit.

If by "what you owe" you mean "What size check do I need to write the IRS on April 15th?," that has nothing to do with it. You owe a million dollars, you have a million dollar refund coming, or anywhere in between--not relevant.
 

cusetownusa

Member
Jan 29, 2020
531
877
Syracuse NY
How are you using "owe" in this context...?

If your total tax obligation is less than $7,500, then you will get a credit up to (but not exceeding) that amount. If it's $0, you get zero. If over $7,500, then the credit is $7,500. This all assumes you otherwise qualify for the full $7,500 credit. This is true of any non-refundable credit.

If by "what you owe" you mean "What size check do I need to write the IRS on April 15th?," that has nothing to do with it. You owe a million dollars, you have a million dollar refund coming, or anywhere in between--not relevant.

Exactly this...I believe that poster is somehow confusing what he owes/pays in federal taxes with what he pays on April 15th.
 

DukeofURL

Member
Apr 1, 2016
687
1,375
North NJ
So am i correct in understanding that with a nonrefundable credit like the 7500, you can only get credit if you owe correct? If you owe nothing you get nothing. If you get a refund normally you also get nothing. Am i correct in this understanding?
Nearly everyone who can afford a new Tesla will be able to claim the $7500 benefit, If you have somehow have reduced your tax liability to 0 and can afford a new Model S, please give me the number to your accountant haha.
 
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orion2001

Member
Apr 14, 2021
110
270
NC
So am i correct in understanding that with a nonrefundable credit like the 7500, you can only get credit if you owe correct? If you owe nothing you get nothing. If you get a refund normally you also get nothing. Am i correct in this understanding?
I would suggest you look up your last Federal tax submission and look up this section:
1622742530238.png


If the total dollar amount there is larger than $7500, then you will likely get the full $7500 credit if your tax situation is similar this year. If it is $0, you will get nothing. Whether you get refunds normally has nothing to do with it.
 
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ItsNotAboutTheMoney

Well-Known Member
Jul 12, 2012
10,631
7,797
Maine
Do not confuse withholding amounts with your tax liability. The amount your employer withholds is an approximation (a variation on estimated taxes) derived from IRS tables: if you have X pay periods per year for Y dollars each, your total tax due will be Z. That will come pretty close if all of your pay is identical, if you have no other income, if your filing status doesn't change, if you don't qualify for any tax credits, if, if, if.... In other words, again: it's an approximation.

That's why you typically get a refund or owe additional taxes when you file. If you have a total tax liability of $10,000, and your employer withheld $12,000, you get a $2,000 refund--but your total tax liability is still $10,000 (you paid it all in advance, plus $2K over, via withholding). If your employer withheld $8,000, you will have to write a check for the $2,000 when you file--but your total tax liability is still $10,000 (of which you've already paid $8,000 via withholding).

For a non-refundable credit of $7,500 (which is what I understand this to be), it's your total tax liability that matters: the credit will reduce that total, but not below $0 (some credits are "refundable," meaning if the credit exceeds your total tax obligation you can get money "back" that you never actually paid in). How much is withheld (or paid via estimated taxes or prior years' refunds or any other method) is not relevant.


Just changing your wording from obligation to liability to be consistent with the quoted working about the rules.

The easy way I understand it is:
Refund = Payments - Liability
Non-refundable tax credits reduce your liability, but your liability can't go below $0. So you might not get all of the credit.
Refundable tax credits act like payments, and The Man will refund anything you've paid above your liability.* So you will get all of the credit.

* Although it's taking a long time this year.
 

doomsday997

Member
Jun 1, 2021
137
168
NY
How are you using "owe" in this context...?

If your total tax obligation is less than $7,500, then you will get a credit up to (but not exceeding) that amount. If it's $0, you get zero. If over $7,500, then the credit is $7,500. This all assumes you otherwise qualify for the full $7,500 credit. This is true of any non-refundable credit.

If by "what you owe" you mean "What size check do I need to write the IRS on April 15th?," that has nothing to do with it. You owe a million dollars, you have a million dollar refund coming, or anywhere in between--not relevant.
Thank you for explaining i think i get it now. So lets say you get a small refund (after various other credits and write offs) like a grand, and have like a 25K tax liability initially. After adding in that 7500K further slashing that liability you will obviously get a large refund. So you can infact get a sizable refund off the EV credit am i correct? Also you stated it correctly i was thinking in terms of what's owed not in terms of liability
 

Darmie

Supporting Member
Jan 13, 2016
1,814
1,198
Clear Lake TX.
Why are they putting the verbiage in this bill about used EV purchase? How does this help with the green movement? It's like a lateral movement to me. This doesn't help increase any manufacturing of greener vehicles.
 

MorrisonHiker

S 100D 2021.4.18.2
Mar 8, 2015
9,837
9,209
Colorado
Why are they putting the verbiage in this bill about used EV purchase? How does this help with the green movement? It's like a lateral movement to me. This doesn't help increase any manufacturing of greener vehicles.
It encourages those who can't buy a new EV to buy a used EV. Both new and used EVs can help reduce the number of ICE on the road.

Colorado used to offer tax credits for used EVs and it resulted in thousands of EVs being imported into Colorado from out of state.
 
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