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IRS Form 8936 - Qualified Plug-In Electric Drive

Discussion in 'Prime Main Forum (2017-2022)' started by bwilson4web, Jan 1, 2017.

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How do you get Prius Prime tax credit?

Poll closed Jan 22, 2017.

  1. There is a tax credit?

    0 vote(s)
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  2. Opps, did I enter the wrong date on my tax form?

    0 vote(s)
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  3. Time to fix those pesky W-4s

    3 vote(s)
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  1. bwilson4web

    bwilson4web BMW i3 and Model 3

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    Source: Qualified Plug-in Electric Drive Motor Vehicle Credit - IRS.gov

    3 Enter date vehicle was placed in service (MM/DD/YYYY) ​

    Opps! I worked hard to buy the car December 28, 2016, only to realize on January 1st the IRS wants me to be driving the car in 2016. Of course the obvious would be to accidentally put down the purchase date for the date of service but that could lead to other problems upon inspection of the Alabama title.

    The simpler answer, adjust my W-4s so in 2017 my withholding tax is reduced by ~$4,500 (i.e., employer, pensions, Social Security.) The tax credit then offsets the income tax not withheld. A sophisticated approach, it means taking $4,500 in 2017 money with the $4,500 credit used to make up the difference.

    As always, consult a qualified tax professional before taking advice from something read on the Internet. Recent history suggests there is much faux news floating around.

    Bob Wilson
     
    #1 bwilson4web, Jan 1, 2017
  2. ttait

    ttait Active Member

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    As long as the tax credit stays viable in 2017, a good solution. But who knows? We don't burn enough oil.
     
    #2 ttait, Jan 1, 2017
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  3. TonyPSchaefer

    TonyPSchaefer Your Friendly Moderator
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    Bob, I list you on all my returns as my financial advisor.
     
    #3 TonyPSchaefer, Jan 1, 2017
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  4. bisco

    bisco cookie crumbler

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    this question hasn't been correctly answered in 10 years.
     
    #4 bisco, Jan 1, 2017
  5. JamesBurke

    JamesBurke Senior Member

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    Bob you have been "using" your new Prime as an example of how to purchace a vehicle out of state. Isn't that a service?

    Best I could find in a saved pdf
    Line 11. Date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in -4Instructions for Form 2106 (2016)

    We discused this tax thing and W4 adjustments awhile back but I'm on the little screen right now so not easy to search.
     
    #5 JamesBurke, Jan 1, 2017
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  6. wjtracy

    wjtracy Senior Member

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    Bob- Congrats on the Prime I am happily shocked I thought we lost you to BMW.
    I think I'd be tempted to take the credit in 2016 if I bought in 2016, but I suspect you are OK either way.

    What you're talking about I think is fiddling around with your 2017 tax withholding so you don't get a huge tax refund at the end next year. That's sort of fine tuning, you would get the credit either way, but sure helps the cash flow.
     
    #6 wjtracy, Jan 1, 2017
  7. bwilson4web

    bwilson4web BMW i3 and Model 3

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    The problem is you don't get a refund on a tax credit. So it is a delicate balance, reducing the withholdings so the normally owed tax are completely offset by the tax credit.

    Did you ever see "The Producers"? I'll simply approach each of the 2016 income sources with the facts and data about the pending, 2017 tax credit. <GRINS>
    [​IMG]


    [​IMG]



    Bob Wilson
     
    #7 bwilson4web, Jan 1, 2017
    Last edited: Jan 1, 2017
  8. bwilson4web

    bwilson4web BMW i3 and Model 3

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    My original plan was to hold the 2010 for a year but the Dec 9, motor mount failure made me realize I might have to live with a 2010 should the BMW i3-REx not work out. I had two weeks in the Prius and the same problem that nearly killed the deal in 2009, came back in spades!

    In April 2009, I had to decide on which 2010 Prius to order and my options came down to:
    • Level 2, Gen-3 Prius - ordinary cruise control and no accident avoidance technology
    • Level + $6,000 + $2,000 Prius - the $6k was the entrance fee for the ability to add the $2k safety features. Seriously, it meant adding $8k to a $24k car. ARE YOU F*CKIN' NUTS!!!
    At the time, we had perfectly fine, Gen-1 Prius that had similar safety and driving as the Level 2, Gen-3 Prius. I came within a 60/40 distance of turning down the deal.

    I'm paying for the TSS-P paying a price ~$24k (with tax credit) versus $28.5k offered by the local Toyota dealer for a Level 3, 2016 Prius Gen-4. Sorry but this deal is too good to pass up.

    There is a risk that in January 2019 the BMW i3-REx without warranty becomes too expensive to maintain. I won't know for at least another 18 months. But I am not afraid to walk away from what may turn out to be a 'white elephant.'

    Bob Wilson
     
    #8 bwilson4web, Jan 1, 2017
  9. CaliforniaPrius

    CaliforniaPrius Active Member

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    I don't get it. You bought the car in 2016 so why not claiming 2016 tax credit? Did you buy the car in a state while living in another state so the "in service" means in service in your own state? I am confused.
     
    #9 CaliforniaPrius, Jan 2, 2017
  10. bwilson4web

    bwilson4web BMW i3 and Model 3

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    I live in Huntsville AL and bought the car from a dealer in Rhode Island, ~1,000 miles away. I might have been able to find one closer but I am not a fan of Southeast Toyota, the region I live in.

    I went by price and the folks at TarBox Toyota don't put a bunch of expensive bling on their cars and that is exactly how I want it. A basic, car with TSS-P and outstanding MPG.

    Bob Wilson
     
    #10 bwilson4web, Jan 2, 2017
  11. CaliforniaPrius

    CaliforniaPrius Active Member

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    I will say the "in service" clause is within the federal realm so whichever sate you have acquired the car's possession as compared to the state of your domicile, the car is considered to be "in service" at the moment you obtained possession.
     
    #11 CaliforniaPrius, Jan 2, 2017
  12. bisco

    bisco cookie crumbler

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    they still have 5 in stock, that's pretty good.
     
    #12 bisco, Jan 2, 2017
  13. wjtracy

    wjtracy Senior Member

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    That's amazing that the Prime is so cost effective, perhaps sales will be good indeed.

    Federal tax credit just depends on taxes owed FORM 1040 Line 56, so withholding does not figure into the credit. Although changing withholding would allow you to not over pay and then get a big refund. I recommend folks try a sample calc in TurboTax.
     
    #13 wjtracy, Jan 2, 2017
  14. hill

    hill High Fiber Member

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    iirc, Bob refers to them as financial advisor Critters. ;) .
     
    #14 hill, Jan 2, 2017
  15. JimN

    JimN Let the games begin!

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    "The problem is you don't get a refund on a tax credit. So it is a delicate balance, reducing the withholdings so the normally owed tax are completely offset by the tax credit."

    The credit reduces the tax liability but will not reduce the liability below zero--the balance of the credit will be lost. The BMW was purchased used so it does not qualify for the credit. The withholdings will cover the balance of the tax due and you'll receive a refund sometime in 2017.

    Your scheme would work if you planned for the purchase and reduced your withholding in 2016. Adjust the withholding in 2017 because you expect a change in your 2017 income not because you purchased a Prime in 2016.
     
    #15 JimN, Jan 4, 2017
  16. wjtracy

    wjtracy Senior Member

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    Case 1:
    Let's say you owe $4500 taxes, and you have $4500 withheld

    Tax Owed $4500
    Tax Withheld $4500
    Prime Credit $4500
    Tax Refund $4500 is because you overpaid taxes (too much withholding)

    Case 2:
    Let's say you owe $4500 taxes, and you have $0 withheld

    Tax Owed $4500
    Tax Withheld $0
    Prime Credit $4500
    Tax Refund $0 is because you planned in advance to reduce withholding.

    In both cases, you qualify for the Prime tax credit.
    These are revenue neutral cases.

    The important thing is that you manage your income to actually owe $4500 taxes (before the credit is applied). You want to have have some income in the year you are claiming credits. For retired folks that could mean pulling some taxable IRA money out or something like that, if your income is lower.
     
    #16 wjtracy, Jan 4, 2017
    Last edited: Jan 4, 2017
  17. hill

    hill High Fiber Member

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    mostly correct. There's a one-year carry over provision. So any credit you can't use in the first year you can carry over one more year. So even if you can't use any the first year - you can manipulating withholdings to use all of it in the next year.
    .
     
    #17 hill, Jan 4, 2017
  18. wjtracy

    wjtracy Senior Member

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    ...really? I missed the carry-over allowance as a possibility.

    Why is everyone talking withholding? Withholding has nothing to do with the EV tax credit, except cash flow management timing, it does impact.
     
    #18 wjtracy, Jan 4, 2017
  19. hill

    hill High Fiber Member

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    Missed it, as in didn't use it? Or, didn't see it within the tax code. One caveat. We used the carryover 5 years ago on our Ev. I wouldn't swear the provision is still there without checking.
    .
     
    #19 hill, Jan 4, 2017
  20. wjtracy

    wjtracy Senior Member

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    In the real world, I have not purchased any Plug-ins.
    But in TurboTax, I have done many sample calcs of EV purchases. I think I even bought a Tesla in Turbo Tax.
    You do need a VIN Number in TurboTax, but any VIN will do!
     
    #20 wjtracy, Jan 4, 2017
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