With no $7,500 credit, could you still afford to buy?

[Mycroft]

How's that? I don't think I'm going to owe since I pay so much in taxes as it is.

What he means is the following:

If you're on W-2, then the estimated taxes are deducted from each paycheck automatically by your employer. To receive the rebate early, just increase your W-4 deductions to reduce the amount withheld from your paycheck. Keep track and once you've gotten to keep about $7,500 more than you normally would, then decrease your W-4 deductions back to where they were.

If you work for yourself or on multiple 1099's, then just reduce your quarterly extimated payments until you have your $7,500.

For example, I'm currently paying about $8,000 each quarter to Mr. IRS man. So for the payment due June 16th, I just send them a check for $500 instead and voila, I have my "rebate" early. :smile:

 

[AnOutsider]

Ok then that's pretty much what I'm going to do. I'll talk to our CFO to figure out how to finagle the numbers.

 

[Trnsl8r]

What he means is the following:

If you're on W-2, then the estimated taxes are deducted from each paycheck automatically by your employer. To receive the rebate early, just increase your W-4 deductions to reduce the amount withheld from your paycheck. Keep track and once you've gotten to keep about $7,500 more than you normally would, then decrease your W-4 deductions back to where they were.

If you work for yourself or on multiple 1099's, then just reduce your quarterly extimated payments until you have your $7,500.

For example, I'm currently paying about $8,000 each quarter to Mr. IRS man. So for the payment due June 16th, I just send them a check for $500 instead and voila, I have my "rebate" early. :smile:

Pretty safe for signature reservation holders and lower production numbers, but if you have a P reservation up around 3-4000 or so, then you may not want to do this - depending on your level of faith in TM. If you get your car in 2013 instead of 2012, you would suddenly owe a whole big bag of tax dollars...

 

[AnOutsider]

Pretty safe for signature reservation holders and lower production numbers, but if you have a P reservation up around 3-4000 or so, then you may not want to do this - depending on your level of faith in TM. If you get your car in 2013 instead of 2012, you would suddenly owe a whole big bag of tax dollars...

That you can offset the next year

 

[Mycroft]

That you can offset the next year

True, but if you owed $7,000+ dollars on April 15th, then penalties would likely be involved.

 

[gg_got_a_tesla]

Pretty safe for signature reservation holders and lower production numbers, but if you have a P reservation up around 3-4000 or so, then you may not want to do this - depending on your level of faith in TM. If you get your car in 2013 instead of 2012, you would suddenly owe a whole big bag of tax dollars...

True, but if you owed $7,000+ dollars on April 15th, then penalties would likely be involved.

Yeah, good points. Even for lower P numbers < 3000, if you are going to opt for the 40 kWh, you may not get your car by Dec 2012.

 

[neroden]

The issue I have with this is from the little research I just did, this tax credit appears non-refundable which means that you must have tax liability of at least $7,500 dollars in order to take advantage of it. If you have less then (say $3,000) you will only be able to use that much of it. I am not sure if it can carry over to the next tax year. What this says is that you are not going to be getting that money back.

-Shark2k

Yep. Thanks to the infamous Bush tax cuts, those of us living off dividends have ridiculously low tax liabilities.

I'm trying to generate some capital gains through wash sales (yes, if you sell at a profit and buy again immediately you generate a taxable gain, unlike if you sell at a loss) in order to be able to "use" the $7500 tax credit. Which will basically end up turning into an increase in the basis for my stocks.

Even that is hard to do, it requires a huge capital gain, over $50000, and the market hasn't been friendly lately.

Yes, I know, most people should be so lucky as to worry about such things, etc... but anyway, I'm just pricing it assuming I don't get the credit.

 

[Andrew Wolfe]

What he means is the following:

If you're on W-2, then the estimated taxes are deducted from each paycheck automatically by your employer. To receive the rebate early, just increase your W-4 deductions to reduce the amount withheld from your paycheck. Keep track and once you've gotten to keep about $7,500 more than you normally would, then decrease your W-4 deductions back to where they were.

If you work for yourself or on multiple 1099's, then just reduce your quarterly extimated payments until you have your $7,500.

For example, I'm currently paying about $8,000 each quarter to Mr. IRS man. So for the payment due June 16th, I just send them a check for $500 instead and voila, I have my "rebate" early. :smile:

Estimated payments need to be spread evenly through the year or tied to the rate that income is received. You can't just lop the whole thing off of an early payment.

 

[Mycroft]

Sure you can. You just *might* pay a bit of a penalty if you're audited.

 

[William13]

I find it odd that there are people who are not retired who are willing to spend $50,000 to $110,000 on a car and don't owe at least $7,500 in federal taxes.

 

[AnOutsider]

Not if they're paid at every paycheck...

 

[Trnsl8r]

Semantics maybe, but I think some forum members interpret "owe taxes" as what you have left to pay at the end of the year, and others interpret is as the total amount of taxes you pay for the entire year. My interpretation is the latter, but I think others may have subscribed to the former.

 

[AnOutsider]

But the 7500 credit can't be applied unless you owe at the end of the year, right?

 

[Trnsl8r]

But the 7500 credit can't be applied unless you owe at the end of the year, right?

Incorrect. A tax credit is a tax credit. It's applied to the total amount of taxes you pay. When you paid your taxes is irrelevant. If you paid $7500 worth of taxes in installments throughout the year and on Dec 31 you owe zero, if you apply the tax credit you would get a refund of $7500. (Not even the IRS would go "well, we would have given you the credit, but now you already paid us so we're just going to keep it...")

IANAL & IANACPA...

 

[AnOutsider]

Hmm... If so, then I wouldn't need to modify my paychecks. What's that at the end of your post? I anal and I ain't a CPA?

 

[Beavis]

Nothing excites me more than talkin taxes! Can a CPA get a holla? So far the advice in this thread is pretty good for a bunch of rank amateurs. One thing to note, the credit offsets AMT + regular tax liability, unlike most credits which don't offset AMT.

Other comments: for you wage slaves, you won't generally get penalized for underpayment but make sure to talk to your payroll dept. If you find that you will not be getting your car at the end of the year, you can boost your withholding at the end of the year to cover the shortfall. The IRS assumes all withholding is ratable throughout the year even if withheld on 12/31. No penalty. For ES filers you will either have to pay 100 percent of prior year tax or 90 percent of current year tax in equal quarterly installments to avoid penalties. High income earners will have to pay in 110 percent of prior year tax in quarterly installments or 100 percent of current year in quarterly installments. Annualizing your income (if it is not earned evenly throughout the year) is also possible.

So absolutely take the credit into account when calculating your estimated taxes or withholding.

 

[Trnsl8r]

What's that at the end of your post? I anal and I ain't a CPA?

:biggrin: Something like that... I am not a lawyer (Internet lingo) and I am not a CPA (made up on the fly). Long live disclaimers...

 

[neroden]

I find it odd that there are people who are not retired who are willing to spend $50,000 to $110,000 on a car and don't owe at least $7,500 in federal taxes.

People living off dividends and long-term capital gains are not necessarily "retired" as we usually think of it -- could be trust fund babies or dot.com billionaires or hedge fund managers or anyone else who's figured out how to take their income in this fashion -- but effectively fall into the same tax classification. Extremely highly favored since Bush. *Extremely*. In 2010, *after* deductions are taken out (standard or itemized), someone whose income is all from dividends gets $32,550 tax-free ($65,100 if married), and then anything above that is taxed at 15%.

So even if you're a single person and you only take the standard deduction and personal exemption, you can have an unearned income of $91,900 and only be paying $7500 in federal income taxes. Most people in this situation, obviously, have more deductions than that (married, children, property tax, investment expenses, investment interest, charitable donations, etc).

Sucks to be making your money by working, and paying much higher tax rates, doesn't it? Yes, I don't think the Bush tax cuts were fair, and I still find it astounding that Obama extended them.

 

[shark2k]

Incorrect. A tax credit is a tax credit. It's applied to the total amount of taxes you pay. When you paid your taxes is irrelevant. If you paid $7500 worth of taxes in installments throughout the year and on Dec 31 you owe zero, if you apply the tax credit you would get a refund of $7500. (Not even the IRS would go "well, we would have given you the credit, but now you already paid us so we're just going to keep it...")

IANAL & IANACPA...

I disagree with the bold part. If kroneal is a CPA maybe he can clarify for us. Like I said in my post a page or two back, I am pretty sure this tax credit is one that falls under the category of not receiving a refund if it does not cover what you owe. Like I also mentioned in my previous post, the 30% Federal Tax credit for solar is supposed to be like this I believe, but that did not actually happen as my parents actually got the money back when they filed their federal taxes. So I realize that just because it is supposed to be one way that might not actually happen. I just think if it does fall under the category of not getting a refund from it if does not cover what you owe for taxes, that people shouldn't be saying you will get the money back in a refund. Now if people that bought the Roadster actually got this back as a refund, then I stand corrected.

I will also point out like Trnsl8r did that I am not an accountant of any type.

If this could be clarified for me (I'm a little confused about it as it does not make sense to me that something is a non-refundable credit yet you still get a refund) I would appreciate it. Also, wouldn't hurt to pretend like you are talking to a child :biggrin:

-Shark2k

 

[Trnsl8r]

I disagree with the bold part. If kroneal is a CPA maybe he can clarify for us. Like I said in my post a page or two back, I am pretty sure this tax credit is one that falls under the category of not receiving a refund if it does not cover what you owe. Like I also mentioned in my previous post, the 30% Federal Tax credit for solar is supposed to be like this I believe, but that did not actually happen as my parents actually got the money back when they filed their federal taxes. So I realize that just because it is supposed to be one way that might not actually happen. I just think if it does fall under the category of not getting a refund from it if does not cover what you owe for taxes, that people shouldn't be saying you will get the money back in a refund. Now if people that bought the Roadster actually got this back as a refund, then I stand corrected.

I will also point out like Trnsl8r did that I am not an accountant of any type.

If this could be clarified for me (I'm a little confused about it as it does not make sense to me that something is a non-refundable credit yet you still get a refund) I would appreciate it. Also, wouldn't hurt to pretend like you are talking to a child :biggrin:

-Shark2k

OK, non-CPA will take another stab at explaining this.

In one sentence: What you happen to owe the government at the end of the year is irrelevant.

Longer explanation.

Say that you make $100k and your tax rate is 30% (yes, over-simplifying the hell out this. Hush.):
a) You've had tax withholdings for a total of $25k during the year. Now you owe the government an additional $5k. Pay up.
b) You've had tax withholdings for a total of $35k during the year. The government owes you $5k. You'll get a tax refund after filing your taxes.

Now say that also bought yourself a Tesla and am filing for the tax credit. Now instead of having to pay government $30k, you have to pay them $22.5k for the year. Similar math applies:
a) You've had tax withholdings for a total of $25k during the year, and filed for the tax credit. Now the government owes you $2.5k. You'll get a tax refund after filing your taxes.
b) You've had tax withholdings for a total of $35k during the year, and filed for the tax credit. Now the government owes you $12.5k. You'll get a tax refund after filing your taxes.

IANACPA again, but I think that's how it would work.