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Increase tax liablity in order to benefit from federal credit?

Discussion in 'Model S: Ordering, Production, Delivery' started by scaesare, Mar 14, 2013.

  1. scaesare

    scaesare Active Member

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    I'm considering purchasing a MS after I receive a mid-year bonus.

    However, I typically receive approximately ~$4500 as a federal tax refund each year. Thus, if I understand the $7,500 federal tax credit correctly, I'd derive no benefit.

    So it would seem that I need to increase my tax liability by about $12K this year in order to make full use of the credit. I'm sure others have faced this... how have you dealt with it?

    I'm considering talking to my employer's accounting folks to see if they would issue me the bonus without with-holding as much federal tax... then I would just go ahead and use the credit to offset that.

    Thoughts or recommendations?

    Thanks.

    -sc
     
  2. bonnie

    bonnie Oil is for sissies.

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    Your refund amount is immaterial. How much do you pay in taxes per year? This is a credit against your tax liability. It has nothing to do with refunds.
     
  3. kvietor

    kvietor Model S S280 VIN 168

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    Your refunds, past or present have nothing to do with the $7500 credit. It has everything to do with the amount of tax due on your adjusted income. Keep in mind a refund is just a return of an advance you gave to Uncle Sam in the form of withholding on your pay statement. Example: You have an adjusted gross income of $100,000.00 and a tax liability on that amount is about $17,000.00. You can reduce that amount by $7500.00 regardless of how much you had withheld. That leaves a tax liability of $9500.00. Now figure in the amount that was already paid as withholding and the net is the amount of refund or tax due. Make sense?

    You type faster than I due Bonnie.
     
  4. scaesare

    scaesare Active Member

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    Perhaps I misunderstood then. I pay well in excess of $7500 in Federal taxes. If this is credited against them, I'll get the additional amount in refund? Thanks.

    - - - Updated - - -

    Ah, kvietor, thanks for confirming.... ok that makes one part of this significantly easier. Thanks.
     
  5. daxz

    daxz Member

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    You should look into adjusting your W4 withholding and increase number of personal allowances. http://www.irs.gov/pub/irs-pdf/fw4.pdf

    You can also use tables here: http://www.irs.gov/pub/irs-pdf/p15.pdf to back calculate number of allowances to use in W4.

    Even if you are not getting Tesla this year if your getting $4K refund you should consider increasing your allowances. Most bonuses are withheld at a flat rate of 25% (unless you are making $1M+).
     
  6. jomo25

    jomo25 P4398

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    #6 jomo25, Mar 14, 2013
    Last edited: Mar 14, 2013
    While this is good advice in general, in reference to the OPs question, your W4 allowances have nothing to do with your eligibility or possibility of benefitting from the 7500 credit. You can benefit as long as what you pay in total taxes for the year is greater than 0. If its between 0 and 7500, you get that amount back, if its greater than 7500, then you get 7500 back. "Total taxes for the year" does not mean what you may owe or get back when you file. It is the total amount of taxes paid via withholding during the year +/- what you pay in addition when you file/get back as refund.
     
  7. ChadS

    ChadS Petroleum is for sissies

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    We have established that this is not an issue for the OP; they have sufficient tax liability to take the credit. Great.

    However, it's still a good question. There are some of us that are retired, and have money socked away in investments that don't generate much yearly income, and have a lot of deductions...so we do not have enough tax liability. I was in that situation for 2012. What I did was take the opportunity to re-balance some of my stock funds, which I've been wanting to do for a few years anyway. I generated income by selling from the funds. Of course I immediately re-invested in different funds; which now have a higher basis so I'll pay fewer taxes later. That gave me enough tax liability to take the $7500 tax credit for the Model S I bought last year.

    Or so I thought. I forgot that I'd been carrying forward a capital loss from a fiasco a while back. That wiped out almost all of the new income, and I was only able to take $244 of the federal tax credit for the car. Sigh. I only recently figured that out, and can't find any way to retroactively generate more income, or to delay reporting of any deductions until next year, so it looks like I'm stuck. Any thoughts are welcome.
     
  8. Cheerose

    Cheerose Member

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    Guess this was already answered... but can the Federal credit be rolled forward or is "One & Done"?

    In comparison, Georgia's tax credit can be rolled forward to future liability.
     
  9. paco3791

    paco3791 TMC OG

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    I ran into a similar problem, because the wife is staying at home taking care of the kids at the moment the total amount in taxes we owe wouldn't allow us to take full advantage of the $7500 tax credit (maybe half or a little less). Still debating if I can put down a reservation this year, but if/when I do the plan is to use a provision that was passed into law earlier this year as a part of the fiscal cliff deal (see here for more details: http://www.forbes.com/sites/ashleaebeling/2013/01/02/roth-401k-conversions-for-all-thanks-to-fiscal-cliff-deal/).

    By converting some 401k money into a Roth 401k I generate taxable income now and use the remainder of the EV tax credit to pay for the taxes and take advantage of paying a lower rate now rather than paying taxes on any money I draw out of the regular 401k in retirement. It should be noted that you've been able to do the exact same thing with converting a regular IRA into a Roth IRA for a while now, but the 401k conversion used to be limited to certain ages.

    - - - Updated - - -

    Nope, the full amount has to be used in the year the car is titled, or it's gone forever.
     
  10. O-G

    O-G Member

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    I'm confused. Maybe something has changed since this is a post from 2013. I thought that Telsa reduced the price of the vehicle by the $7,500 because they received the credit. Is this credit on your taxes something different?
     
  11. astrotoy

    astrotoy Member

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    If you buy the car, you get the $7500 tax credit, not Tesla. I bought mine in February, 2013 and got the $7500 Tax Credit on my 2013 Federal Income Tax.
     
  12. preilly44

    preilly44 Member

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    I have another question regarding the $7,500 tax credit. If I buy a P85D now (I have one ordered) and receive it in December (which is what I'm hoping for), can I buy another one in 2015 and get another $7,500 tax credit?

    Patrick
     
  13. andrewket

    andrewket 2014 S P85DL, 2016 X P90DL (soon 100)

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    Yes. There is no limit, as long as you buy the car with the intent to use it, not sell it. You can buy multiple cars in the same tax year; there is no need to split it across tax years. In fact the form has space for two VINs. Keep in mind you need sufficient tax liability to take advantage of the credit. The IRS won't give you the credit as part of a refund. That would be the only reason to buy the cars across two years.
     

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