Could Someone Explain $4500 Tax Credit?

Discussion in 'Prime Main Forum (2017-Current)' started by MartyPrime, May 19, 2017.

  1. MartyPrime

    MartyPrime Junior Member

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    I apologize if that question has already been asked, but I'm looking for a simple tax credit explanation.

    With this scenario:

    Let's say I am getting a refund of $2,000 dollars on my taxes. Does the $4500 add to my refund? Do I now get $6500? OR, if I am already getting a refund, do I basically get hosed and lose out on the $4500?
     
  2. HPrimeAdvanced

    HPrimeAdvanced Senior Member

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    Yes, the hose answer is the correct one.
    The $4502 Federal tax credit can be applied against any PERSONAL income taxes you owe the IRS for the year of the purchase; if you owe no taxes, you get squat! It's the application of the "hose principle" as you have so elegantly described here!. I feel for you 'cause I'm faced with the same conundrum. If you get a refund, you probably still paid taxes; it's that amount that can be reduced by the credit. NO, I am not a CPA, or attorney; you need to consult your accountant to verify the facts. Good luck!

    .
     
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  3. pricoaster

    pricoaster Member

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    Rather than looking at your refund, you need to look at your tax liability. The refund only means that you withheld $2,000 more than your tax liability (for example, if your liability was $6,000 but you had $8,000 withheld throughout the year, that's a $2,000 refund). Line 47 on the 2016 1040 form shows your tax liability. If that number is greater than $4,502, you will get the full credit. If it's less than $4,502, you will only get the credit up to the amount that brings your liability to $0 (or whatever minimum tax you owe).

    So taking the example above, your liability is $6,000. Subtract the full credit of $4,502, your liability drops to $1,498. You had $8,000 withheld throughout the year, so now your refund is $6,502.

    Other tax factors may come into play, but that's the simple explanation.
     
  4. bwilson4web

    bwilson4web BMW i3 and Model 3

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    To amplify what @pricoaster described, here is an example:
    • $27,310 - tax liability line 47
    • $5,432 - tax credit both Prime and EVSE line 55
    • $21,878 - reduced tax liability line 56, where the "$-0-" rule applies
    The key is the tax liability should exceed the tax credit. If not, the "$-0-" rule applies and money is left on the table.

    [​IMG]
     
    #4 bwilson4web, May 19, 2017
    Last edited: May 19, 2017
  5. SaraBBrown94

    SaraBBrown94 Active Member

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    So your tax liability is only based on how much money you owe the government for the tax year. Changing how much is taken out doesn't change anything. The only thing you can really do is make more/less money to change your tax liability. So if you make a lot and can afford this car, you'll probably be fine. (From my understanding)

    I make like $50k. Some is taken out for retirement and not taxable. Tax liability for me is like $5500 or so. There's calculators for trying to figure it out online that are nice.

    Posted via the PriusChat mobile app.
     
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  6. Trollbait

    Trollbait It's a D&D thing

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    If don't have enough liability to get the full credit, and a standard retirement fund, you could increase the liability by converting that fund to a ROTH one.
     
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  7. bisco

    bisco cookie crumbler

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    there is nothing simple about it.
     
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  8. tanner9868

    tanner9868 Junior Member

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    That is exactly what we are doing (changing to a Roth). We are still claiming one in college and didn't want to jeopardize losing either credit. (college credits or prime credit)
     
  9. JamesBurke

    JamesBurke Senior Member

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  10. bisco

    bisco cookie crumbler

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    only 6 pages?:p
     
  11. crewdog

    crewdog Acting Ensign Prius Prime

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  12. CharlesH

    CharlesH CA HOV Decal #5 on former PiP

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