Tax Credit Question

[GoGreen1]

My understanding is that even if you owe less than $7500 in fed taxes, say $5000; then you would get a tax refund of $2500 ($5000-$7500).

This credit is not a refundable credit and hence no refunds; your liability should be equal to or more for this to fully apply

 

[traxila]

This credit is not a refundable credit and hence no refunds; your liability should be equal to or more for this to fully apply

This is not true. It is a tax credit. You need to owe or to have paid at least 7500 in fed tax. If you have paid it already when you file taxes you will get a credit against the tax you paid.

 

[Yinn]

This credit is not a refundable credit and hence no refunds; your liability should be equal to or more for this to fully apply

This is not true. It is a tax credit.

This is going to go in circles. You're both right.

The tax credit can be applied to the amount of taxes you owe. If you already paid it with cash or payroll deductions, then are applying the credit anyway. This results in an overpayment. If you are already getting a refund for overpayment, it results in a larger overpayment. This makes it seem like the tax credit is refundable, since you are getting cash back. But you are actually getting refund for what you paid in cash only.

The tax credit is NOT refundable. But the amount you overpaid IS refundable.

 

[Gwgan]

I hope this helps more than confuses but I'm going to add a comment about the potential tax savings on installing charging hardware. There is also an Alternative Fuel Infrastructure Tax Credit available for 2016. If you put a wall charger in your garage you can save 30% of the cost but only if it does not reduce your alternative minimum tax AMT. The $7500 vehicle credit discussed above is not limited by the AMT rule.

 

[Darryl]

My understanding is that even if you owe less than $7500 in fed taxes, say $5000; then you would get a tax refund of $2500 ($5000-$7500).

Wrong you would get $5000.

 

[scharlesjr]

Good thread!!!

Is the tax credit a one time deal??? Let's say I get an S this year and decide to replace my wife's ICE later this year with another S would we qualify for $15k in credits or only $7500? Also of note this will probably be the last year of the $7500 with Tesla as they will surpass the 200,000 (I think that's the amount of vehicles shipped that the credit starts to disappear at) vehicles sold mark when M3 starts shipping.

 

[ratchet]

Good thread!!!

Is the tax credit a one time deal??? Let's say I get an S this year and decide to replace my wife's ICE later this year with another S would we qualify for $15k in credits or only $7500? Also of note this will probably be the last year of the $7500 with Tesla as they will surpass the 200,000 (I think that's the amount of vehicles shipped that the credit starts to disappear at) vehicles sold mark when M3 starts shipping.

IRS Form 8936 has columns for "Vehicle 1" and "Vehicle 2" which are added together at the end of the form. If your tax liability is greater that $15,000 it appears you can claim up to two tax credits of $7,500 each. The credit phaseout (reduction) begins in the second calendar quarter after the quarter in which the 200,000th vehicle is sold so for Tesla it appears that it will probably be the end of this year when the credit starts dropping.