And be sure you are looking at your federal income tax liability. Social security and medicare taxes don't count and your withholding is only how large a free loan you give to the IRS.
-
Want to remove ads? Register an account and login to see fewer ads, and become a Supporting Member to remove almost all ads.
And be sure you are looking at your federal income tax liability. Social security and medicare taxes don't count and your withholding is only how large a free loan you give to the IRS.
Nice post. Just one clarification.
For that scenario, you get a $10k deduction to your taxable income. That reduces your tax by your top tax rate(s). So if you are in the 25% bracket at the end of all the deductions and credits, it will save you $2.5k .
Restated, for federal tax purposes (within limits) only 80% of your pass through income is taxed.
For that scenario, you get a $10k deduction to your taxable income. That reduces your tax by your top tax rate(s). So if you are in the 25% bracket at the end of all the deductions and credits, it will save you $2.5k .
Restated, for federal tax purposes (within limits) only 80% of your pass through income is taxed.
As I've always heard the terms used a tax deduction is taken from your income, like the home mortgage deduction and a tax credit is taken from the actual tax owed. A tax credit is more valuable than a tax deduction because, as you point out, a deduction only reduces the amount you are taxed on. I have never heard the term "income deduction" though that is more accurate.
That term may never have existed before
. Now that I think about it post coffee, your original statement was correct and I was parsing things incorrectly (we were just discussing the new tax structure at the office and that we would only be taxed on 80% of the income).Tax deduction: subtraction from income, as you stated
Tax credit: subtraction from tax owed (like the EV credit which I've been miss-speaking as rebate)
Refundable tax credit: subtraction from tax owed that can result in a net refund
Thanks for getting me back on the right terms with the right terms.
The year I bought my car, I changed my quarterly to just include social security and medicare. I didn't owe any federal tax that year. In 2017 I went back to my normal withholding pattern.
I wish. If your quarterlies are like mine (LLC/partnership) almost half is medicare/ social security ~15% of gross. Tax credit doesn't effect that part.
You might want to check into the rules for quarterly payment amounts. One year when I was doing contract work I didn’t pay enough in my first payment, but made it up in the second one. Even though I had paid enough when I filed my taxes, I was hit with a penalty for not paying enough the first quarter (according to my CPA it basically amounted to the interest they would have earned on the amount I was short the first quarter). I don’t know if this applies with the EV tax credit or if it matters when you purchase the car, but you might want to look into it before you decide to short your tax payments.
Many thanks for input all!
Hmm.. I'm just Sole Proprietor (I'm looking into S-corp) & I'm making about the same as last year...
Does anyone know what the line # is on a 1040 for what I paid for medicare/ social security
(would that be line 57 'Self Employment tax' in the 'OtherTaxes' section)?
And where the rest might be stated (that would be the part I would get the credit deducted from)?
THX!!!!!!!!!!
Hmm.. I'm just Sole Proprietor (I'm looking into S-corp) & I'm making about the same as last year...
Does anyone know what the line # is on a 1040 for what I paid for medicare/ social security
(would that be line 57 'Self Employment tax' in the 'OtherTaxes' section)?
And where the rest might be stated (that would be the part I would get the credit deducted from)?
THX!!!!!!!!!!
Last edited:
Yeah, your business income goes on Schedule SE which then let's you calculate the medicare/social security payment, then that carries over the SE line on the 1040.
CORRECTION
Line 47 is the tax that gets offset by credits on line 56. EV credit comes in on line 54. Thanks @freeform1999 for catching that.
Last edited:
Thanks mongo...
But wouldn't I have to pay the full amount on line 57 'Self Employment tax- SE' ?
And so the calc would be :
line 63 'Total Tax' minus the amount on line 57 'Self Employment tax- SE'
= the amount I could deduct up to 7500 using the 7500 tax credit.
Hope that makes sense...
THX!!!!
But wouldn't I have to pay the full amount on line 57 'Self Employment tax- SE' ?
And so the calc would be :
line 63 'Total Tax' minus the amount on line 57 'Self Employment tax- SE'
= the amount I could deduct up to 7500 using the 7500 tax credit.
Hope that makes sense...
THX!!!!
2 questions for you guys coming from a Canadian:
Are there any rules stipulating that a company cannot manipulate its deliveries to game the system as everyone is suggesting for their "ideal" scenarios? It's a great idea for Tesla to deliver its 200,000th car on the first day of a quarter to maximize incentives for its customers, but are there any rules to prevent such manipulation? I imagine the government would be displeased...
If no such rules exist, I hear a lot of people saying Tesla might slow its rate of delivery, but I wonder if an alternative option would be to continue accelerating its rate of M3 deliveries, but to deliver them to a different unaffected country (ie Canada, which is close by, likely has similar regulations, and so only minor modifications would be required on a M3 destined for US vs Canada) Just my wishful thinking that early reservation holders in Canada might see a surprise "burst" of car deliveries near the end of Q1 or Q2 so as to allow Tesla to land its 200,000th delivery right on the first day of a quarter, and thereby effectively extend the 7500k tier of the rebate and "do the right thing" for its customers. This option allows Tesla to continue its global deliveries and revenue, without negatively impacting the number of rebates given to its US customers (albeit at a cost of a temporary slow down in US deliveries only). Using the mid April estimate thrown out above, any chance Tesla would start deliveries to Canada from early April until June, then stop altogether and deliver 100% of what they build to the US for the remaining 2 quarters so as to maximize those receiving the full rebate?
Are there any rules stipulating that a company cannot manipulate its deliveries to game the system as everyone is suggesting for their "ideal" scenarios? It's a great idea for Tesla to deliver its 200,000th car on the first day of a quarter to maximize incentives for its customers, but are there any rules to prevent such manipulation? I imagine the government would be displeased...
If no such rules exist, I hear a lot of people saying Tesla might slow its rate of delivery, but I wonder if an alternative option would be to continue accelerating its rate of M3 deliveries, but to deliver them to a different unaffected country (ie Canada, which is close by, likely has similar regulations, and so only minor modifications would be required on a M3 destined for US vs Canada) Just my wishful thinking that early reservation holders in Canada might see a surprise "burst" of car deliveries near the end of Q1 or Q2 so as to allow Tesla to land its 200,000th delivery right on the first day of a quarter, and thereby effectively extend the 7500k tier of the rebate and "do the right thing" for its customers. This option allows Tesla to continue its global deliveries and revenue, without negatively impacting the number of rebates given to its US customers (albeit at a cost of a temporary slow down in US deliveries only). Using the mid April estimate thrown out above, any chance Tesla would start deliveries to Canada from early April until June, then stop altogether and deliver 100% of what they build to the US for the remaining 2 quarters so as to maximize those receiving the full rebate?
I'm confused again..
You sure it isn't line 57 'Self-employment tax' that gets subtracted from line 63 'total tax'
that shows the amount left that one can use the 7500 credit towards?
Thx
It depends how you approach it.
47 is your total tax, 48 through 54 are all the nonrefundable credits you qualify for, EV goes on 54.c and the total goes on 55.
If you run your taxes without the EV credit, the number on 56 is your tax due for the year. If that number is >7,500, you'll get the full EV credit off (assuming qualification for it). If line 56 is less than 7,500 without the EV credit, with the credit it will be 0 (non refundable so it can't go negative).
Lines 57-62 are additional taxes you pay that do not get offset by tax credits. That's how they ensure social security and Medicare get paid (SE and such). So, if wanted to work bottom up, you would need to subtract lines 57 through 62 from line 63. (Which is then line 56 again).
So to see the net effect of an EV purchase, either run forward to line 56 without the credit, or backward from 63 to lines 56 subtracting lines 57 to 62.
To your question: if all you have in lines 57 to 62 is SE, that is all you subtract from 63.
When you do your taxes as a self employed person, don't forget to deduct your health care premiums line 29.
Disclaimer: I am not a CPA, so verify for yourself.
This.
If you want to predict when the US tax credits start to phase out, it is important to know the actual IRS rule! Otherwise, people like the OP are likely to predict an earlier phase out time.
GSP
Dr. J
Active Member
I agree in principle with both of these posts, but the details may matter in some cases. There's a new tax regime in 2018 that none of us has experience with.
@wdolson, I think you're overestimating the percentage of taxpayers who itemize, particularly post-reform. Pre-reform, about 30% of taxpayers itemized (according to 2013 tax data from the Tax Foundation), but estimates of itemizers post-reform are closer to 10%. This is because personal exemptions (which applied with either standard or itemized deductions) have been eliminated, the standard deduction has nearly doubled, and deductions for state and local taxes are limited to $10K. But your larger point is accurate.
@dhanson865, your statement is true except: tax reform. Taxpayers are differentially impacted, but some may owe in 2018 (fairly) significantly less or more tax than in 2017. Also, rates have gone down almost across the board, so as a general rule for most taxpayers, you would probably expect slightly lower tax liability, all else equal.
It seems like splitting hairs, but if tax liability in 2017 was right around $7,500, I would advise following your "noticeably less" advice:
I wouldn't let taxes drive my investment decisions, but certainly would let them drive timing if real money is at stake.
With Tesla's poor production ramp-up (and nonexistent start date for the standard model, which is what I want), it's clear to me now that the company is literally taking $7,500 out of my pocket and putting it into the pocket of someone wealthier who can afford $54K plus tax for his/her Model 3. Why? The tax credit phase-out, of course. Even in the best case scenario (Tesla delays even more and doesn't reach the 200K sales point until Q3, let's say), the only Tesla buyers who will get the credit are those who get a car delivered in 2018. Unless I'm missing something, that means all of the standard model buyers will be paying at least $3,250 more than they should have, and probably the whole $7,500 for most people on the list.
I'm not sure how Tesla justifies this pretty obvious marketing bait-and-switch. First this is a $35K car for the average Joe Lithium, and we are going to get $7,500 taken off the top. That was March 2016, when I thought getting to a dealership at the crack of dawn on March 31st actually mattered. More than two years later, I am estimating that I have another year to go to see a car in my driveway. It's not that I'm sorry Tesla is doing so well and selling a lot of cars... good for them, and good for EVs in general. But by deliberately not producing the standard model, they are allowing others to jump the line and take a credit before they are entitled to it.
I never thought I would consider canceling and getting the 150 mile-range Leaf, but why shouldn't I if sitting around is going to cost me thousands of dollars?
I know... I should direct my anger at a short-sighted Congress and lackluster lobbying by ambivalent car makers who would rather go the compliance car route than win the EV market. But it was Tesla, and Tesla alone, that made the decision to put standard model buyers second, even when they've shown nothing but loyalty.
JG
I'm not sure how Tesla justifies this pretty obvious marketing bait-and-switch. First this is a $35K car for the average Joe Lithium, and we are going to get $7,500 taken off the top. That was March 2016, when I thought getting to a dealership at the crack of dawn on March 31st actually mattered. More than two years later, I am estimating that I have another year to go to see a car in my driveway. It's not that I'm sorry Tesla is doing so well and selling a lot of cars... good for them, and good for EVs in general. But by deliberately not producing the standard model, they are allowing others to jump the line and take a credit before they are entitled to it.
I never thought I would consider canceling and getting the 150 mile-range Leaf, but why shouldn't I if sitting around is going to cost me thousands of dollars?
I know... I should direct my anger at a short-sighted Congress and lackluster lobbying by ambivalent car makers who would rather go the compliance car route than win the EV market. But it was Tesla, and Tesla alone, that made the decision to put standard model buyers second, even when they've shown nothing but loyalty.
JG
TaoJones
Beyond Driven
Pshaw. Half the tax credit will be available to line waiters who opt for the base model.
But $35K was never going to be $35K, unless you don’t want AP features, in which case then buying a Leaf or Bolt would seem to be a fine choice.
And let’s not forget the pay as you go model for the 3, which adds up big time at $0.26/kW in CA to the tune, easily, of $3,000/year in practical use (urban driving will impose quite the efficiency penalty relative to point to point highway jaunts.
Even the lowly Leaf includes 2 years of free charging.
Even in CA, $35K is $40K just due to dest/doc fees and taxes and such. At some point, hairs get split for no practical purpose.
Fortunately for you, salvation is at hand. CPO AP1 Model S are now and will be available in the $40Ks. Less as time passes. AP1 > AP2 so far, and such a car will buy you 3 years of warranted driving until real FSD arrives.
As a stopgap car for the next 3-4 years, there’s no better TCO value than a CPO AP1 Model S.
Or you can buy the strippie Model 3 and watch half yer investment turn to dust from depreciation while paying a disproportionately higher running cost along the way.
Point being, it’s all relative. You may wish to hoist Tesla upon its own petard over their production sequence, even though higher margin models always get done first, or you could take a step back. Evaluate total dollars out over time until we get to FSD. The $35K Model 3 is not the best TCO answer imnsho.
But it will be new and spiffy, so there’s that.
I do not recall that "$7,500 off" was ever a promise. I remember that when I reserved, I was pretty much counting that it won't be there due to S/X sales. Now, it seems I will get a chance to claim it if I buy a more expensive configuration. So, it is a choice I did not count on.
Similar threads
