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Tax credit 2024 [The tax credit discussion thread]
- Thread starter vickh
- Start date
Sure, but some people promote point of sale's lack of tax liability as a loophole or Treasury being nice when it's actually how the law is written. And that bugs me because it generates uncertainty.
Even your response shows the bias: "effectively becomes refundable", it's not 'effectively' refundable, it is 100% written in law refundable.
ucmndd
Well-Known Member
I’m far from an expert on this but generally you can make Roth contributions, conversions, etc. for the prior year up until the filing deadline.
That applies to contributions but not convertions They have to be completed bby 12/31 of the tax year you want impacted.
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When Is the Roth IRA Conversion Deadline?
The Roth IRA conversion deadline falls earlier than the federal tax deadline, which could have important implications for your tax bill. Learn more about when to convert.
I could not find this in the law. Could you provide a source please?
What I did find was that if you transfer the credit at point of sale, then if your tax liability does not come up to the amount you transferred, the IRS will not re-capture the difference. However, if you don't do the transfer and wait to file it with your income tax at the end of the year, it is still limited to your tax liability. So, in effect, it is not refundable by law, just that the IRS will not try to re-capture the difference if you do it at point of sale.
https://www.irs.gov/newsroom/topic-h-frequently-asked-questions-about-transfer-of-new-clean-vehicle-credit-and-previously-owned-clean-vehicles-credit
Q4: What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)
A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.
https://www.npr.org/2023/12/28/1219...cles-tax-credit-car-shopping-tesla-ford-vw-gm
Now, even families with no tax liability at all can get the tax credit, effectively as a cash discount for the vehicle purchase.
And if you take the credit as a rebate, you don't need to calculate your taxes in advance to be confident in the amount you'll get.
(IRS documents still state that your tax credit can't exceed your tax liability, and that remains true if you wait to claim it on your tax return. But this FAQ confirms that that if you choose to take a credit as an up-front rebate and it exceeds your tax liability, that "excess" money "is not subject to recapture" by the IRS. That means you get to keep it.)
Something else I found interesting. You can claim the tax credit on two vehicles in one year. So, effectively, you can take $15,000 worth of POS transfers even if you have no tax liability and it is not subject to recapture.
Q7. How many transfer elections can I make in a year? (added Oct. 6, 2023)
A7. You can make no more than two elections to transfer a clean vehicle credit each tax year. Such elections could be for two Clean Vehicle Credits or one Clean Vehicle Credit and one Previously Owned Clean Vehicle Credit, but cannot be for two Previously Owned Clean Vehicle Credits. Accordingly, spouses may each transfer no more than two Clean Vehicle Credits each tax year.
Sure thing. Important thing to know going in is that end of year and point of sale/ advanced credits are two different things covered by different sections of the legislation.
Point of sale/ advanced credits:
(g)(7)(C)
(C) TREATMENT OF ADVANCE PAYMENTS.—For purposes of section 1324 of title 31, United States Code, the payments under subparagraph (A) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.
Title 31, section 1324 (b)(2):
(b) Disbursements may be made from the appropriation made by this section only for—
(1) refunds to the limit of liability of an individual tax account; and
(2) refunds due from credit provisions of the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) enacted before January 1, 1978, or enacted by the Taxpayer Relief Act of 1997, or from section 21, 24, 25A, 35, 36, 36A,[1] 36B, 168(k)(4)(F), 53(e),[1] 54B(h),[1] 3131, 3132, 3134, 6428, 6428A, 6428B, 6431,[1] or 7527A of such Code, or due under section 3081(b)(2) of the Housing Assistance Tax Act of 2008.
The end of year personal credit is characterized:
(c)(2) Personal credit. For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year.
With subpart A being nonrefundable personal credits.
The IRS FAQ wording says "is not subject to recapture" which is accurate. Contast that to 'will not be recaptured' which implies it is subject to recapture, but they choose not to.
Full text:
Code Sec. 30D (New Qualified Plug-In Electric Drive Moter Vehicles)
Exactly.
Refundable refers to a situation where tax credits exceed tax liability and those credits may be included in a refund when taxes are filed. In that sense, nothing is written into the law making these clean energy tax credits refundable. In fact, if you wait to take the credit to when you file your taxes, you can not take any excess above your tax liability. Thus, it is not "refundable".
I agree with you that the tax credit as taken at point of sale is not to be "recaptured" is written into the law. It is not just that the IRS chooses not to recapture. However, that does not define it as "refundable".
Nothing in your quoted text states or implies that the advance tax credit is called "refundable".
JMO
Point of sale credit transfer is 30D(g)
(g)(7) calls out the treatment of the credit
(g)(7)(C) says the "For purposes of section 1324 of title 31, United States Code, the payments under subparagraph (A) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section."
Title 31, sec 1324 (b)(2) covers "refunds due from credit provisions"
As opposed to Title 31, sec 1324 (b)(1) which is "refunds to the limit of liability of an individual tax account"
The exception is if someone chooses not to take the credit at POS. I can't see why other than an issue at delivery (they had a portal issue, and I chose to reschedule rather than deal with tax time+ wait a year.
This all came about b/c someone posted about a '23 issue in this thread.
Not if buying a new Tesla. However, if buying a used Tesla or some other brand from a dealer who has not registered for the POS program, this could be an issue.
True but if you contribute 6500-7500 to a Roth IRA that could increase your tax responsibility by $800 and if you’re married maybe by $1600 depending on your age and tax bracket (I assume your last dollar is taxed at 12%).
How? That doesn't increase your income so it wouldn't increase your taxes.
Roth contributions are after tax. So instead of a traditional IRA that defers taxes a Roth means you pay taxes now. Since you’re doing 2023 taxes and you say you will contribute $13,000 (you + spouse) to a Roth. That means you paid taxes on $13,000. Depending on your rate (I assume 12%) that’s $1560 of taxes. Not the $3500 more you were looking for but it’s getting closer. This does assume you can come up with 13,000 cash before 4/15. And if you are older than 50 then you can contribute a little more.
No, contributing to Roth doesn't change your tax liability. You already had the money and paid taxes on it. Now if you were going to contribute to a traditional and decide to do Roth instead that would cause more taxes because you didn't contribute to the traditional, but it isn't because of the Roth.
No, you would have had to have already made a traditional IRA contributing that you would reverse to get the money. Nothing else you can do today to increase last year's tax liability that I am aware of.
If I contribute $14000 to a IRA now, ( over 50, married) that would reduce my 2023 taxes by $1680. There is no question about that. It stands to reason that if you had $14000 in your pocket that you already paid $1680 in taxes on it and since it’s for a 2023 Roth that means you paid $1680 in taxes on it but I am not an accountant so YMMV. If you are an accountant and know for sure then I am sorry I suggested it.
Right, but as you said you would have already paid the taxes when you earned it. Putting it in a Roth world not increase your 2023 taxes.
You appear to be correct. I just tried this in Turbo Tax and my tax responsibility did not change. I stand corrected. Thank you.
