EV Tax Credit is Nonrefundable!

Are you sure about the credit being lost? Check with a tax person before you spill too many tears. I don't know US tax laws, but here, as long as you've paid more than the tax credit, whether it was deducted at source or paid upon filing, you'll get the full credit.

 

What you owe/get refunded at tax time is just settling the balances. Basically you calculate total tax owed (based on incomes, deductions, and credits) and total tax already paid (withheld), and then the difference is paid to the proper party. This number is not the basis for nonrefundable tax credits. It's the total tax owed that matters. Check your return from last year.

ETA: Nonrefundable credit means that the credit cannot be used to make your total tax owed below zero. I think the confusion is the word "refund". In the context of a tax credit, refund does not mean a refund from excess withholding.

 

You, along with millions of others confuse Total Tax Owed with the amount you have already paid in. The amount paid in through payroll deduction determins if you still owe or if a refund is due, eg: Your total tax obligation on line 44 of your 1040 is $10,000. The amount you've already paid, from payroll deduction is $8,000 (line 61). Since in this example line 44 is greater than line 61, you will have to send the IRS an additional $2,000. If it were the reverse, Line 44 was $8,000 and line 61 was $10,000, you would get a refund of $2,000.
Now that we have that straight, let's throw in the $7,500 Tax Credit. Line 44 is $10,000 you owe. Line 61 is $8,000 you've already paid, plus the $7,500 in credit means you have a total of $15,500 (8,000+7,500) paid in. Since you only owe $10,000 and your credit is $15,500, you would get a refund check for $5,500 from the IRS.
I hope that makes sense. Now, it is true that you can not be refunded an ammount greater than you actually paid in, so had the numbers been such that you had a final credit of $8,500 (line 61 minus line 44), the IRS would only refund you $8,000 because you had only paid in $8,000 through you payroll taxes. (in other words, if you only had $7,000 deducted by payroll, you can only get a check back for 7K, reguardless of how much the credit is for, unless it is a refundable credit and the EV credit is not a refundable credit)
Does anyone know if any unused credit will role over into the next year?
Hope that helps,
Tom

 

Priushippie: Politburo and thbjr are correct. I'll try to say it in different words: For the purpose of the nonrefundable tax credit, the amount you "owe" is your total tax obligation for the year. Your employer takes money out of your pay check and applies it against this total amount owed. If your employer took more than you owe, the difference is refunded to you. The tax credit for buying an EV (assuming the EV qualifies) reduces the amount you owe in total for the year, and therefore increases the amount of your tax refund at the end of the year.

The confusion arises in the use of the word "nonrefundable," which means that the IRS will not give you back more than you've paid in.

Calculate (or estimate) the total amount of your federal income tax for the calendar year in which you will buy the EV. If that total amount is less than the credit (in this case $7,500) then you will pay no taxes and you will be refunded the entire amount that was withheld from your pay. If your total tax obligation is more than $7,500 then $7,500 will be deducted from your total tax obligation and the remaining amount will determine if you still owe or if you get a refund.

 

I want to meet the person who buys an EV yet has less than $7500 federal taxes. I bet it would make for an interesting story.

 

It's conceivable, if all your income comes from municipal bonds. Not a wise investment strategy, but possible.

 

I never thought of it this way, but if you are sure to buy an EV in a given year you could in theory add a deduction or 4 to your W4 to lower the tax deducted from each paycheck. As long as you calculate it correctly and do not owe at the end of the year it should be kosher.

 

I bought 2007 Prius on Nov 2006; I thought I will get around $1,500.00 Tax credit, but I did not get any because my AMT (Alternative Minimum Tax) line 45 is not zero!!

There was A ‘patch’ to the Alternative Minimum Tax for tax year 2008 and 2009 allowed this credit to be claimed by those paying the AMT (I think this was applied for Civic GX CNG but not Prius)!!

I think if your tax Form 1040 line 45 is not zero, you might not get any tax credit. I am not sure if we have a AMT patch for 2010-2011 or not.

 

If the EV credit is a misc. credit then it probably is affected by AMT, just like the hybrid credit was.

The AMT 'patch' must have been enacted after Toyota's credit expired.

 

I am under the impression that the tax credit for buying an EV is not affected by AMT. But I'm not entirely certain of that. I'd be interested if there's a tax professional who actually knows.

 

More information...

Federal Tax Credit for Electric Vehicles Purchased in or after 2010

Phase Out & Termination

less... The credit begins to phase out for vehicles at the beginning of the second calendar quarter after the manufacturer produces 200,000 eligible plug-in electric vehicles (i.e., plug-in hybrids and EVs) as counted from January 1, 2010. IRS will announce when a manufacturer exceeds this production figure and will announce the subsequent phase out schedule.




Claiming the Credit

less... Fill out Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit.
For vehicles acquired for personal use, report the credit from Form 8936 on the appropriate line of your Form 1040, U.S. Individual Income Tax Return.
For vehicles purchased in 2010 or later, this credit can be used toward the alternative minimum tax (AMT).
If the qualifying vehicle is purchased for business use, the credit for the business use of an electric vehicle is reported on Form 3800, General Business Credit.

 

The 2010 version of Form 8936 is not yet published. Presuming the only change will be the year date it will be reported on line 53c of Form 1040. This credit can not be used to reduce the income tax below 0. It is not affected by AMT as the hybrid credit was back in 2006.

Taxpayers with large education or child credits will be the ones most likely unable to (fully) take this credit.

 

Thanks, Jim.

 

A couple, married, filing jointly with a fully funded H.S.A. account can earn more than $93,000 and still be in the 15% tax bracket. That bracket dictates that Capital Gains and Dividends are taxed at 0%.

It is conceivable that a retiree with income from Munis, and a stock portfolio would pay very little in tax.