RobbW wrote:I thought I read somewhere that the EV credit was kind of like "use it or lose it". If you weren't able to use the full credit in the year you purchased the EV, you couldn't roll the remaining credit to the next year.
Alright, let's see if I have this correct. For simplicity's sake (and not indicative of anyone's current financial position), let's assume a family's gross household income was $100K for the year. Dad's an underpaid bean counter, but mom's an exotic dancer with great big tips! After taking their deductions for dependents, mortgage interest, property taxes, and charitable contributions, their net taxable income is $65K. If they are in the 29% tax bracket, their total tax liability is $65K x 29% = $18,850. Now, is THIS the tax liability you're referring to? So, regardless of how much federal income tax was withheld from their paychecks for the year, as long as this amount is over $7,500, they can claim the full EV tax credit. If, through the miracle of good planning, this couple's federal income tax withholding for the year was exactly $18,850 (meaning $0 remaining liability), they will still receive a $7,500 tax refund?
LOL ... and your analysis is correct up until you mixed in your withholding. If you imagine the law abiding (because she's married to a bean counter) exotic dancer who doesn't have any
withholdings because she's paid totally in cash tips (the bean counter is unemployed for the year, for example), but she still makes $100k (she's a top model
). Their tax liability is still $18,850. Since they didn't have any ongoing withholdings, the total amount of $18,850 must be paid to the IRS. However, if you buy an EV, you can subtract $7500 from the $18,850 and pay only $11,350. ($11,350 is your liability for the year, whether you had withholdings during the year or not. Some savvy bean counters wait until April 15th of the next year to pay their taxes because it saves them a few dollars by earning interest on that money instead of letting the IRS have it interest free for some number of months.)
Regarding the "use it or lose it" aspect of the credit, I tried to find some documentation of this, but couldn't. Ideally what happens is that if your 2013 tax liability is only $5k (which is erased by the $7.5k EV credit), the remaining $2.5k of the credit could be applied to your tax liability in 2014. I heard that you can, but I'm not sure. Anybody else know for sure or have a reference? (Incidentally, the IRS will not "pay" you for a credit in excess of liability, that would be like a rebate. Rather, credits only reduce the tax liability owed to the IRS, at best down to a liability of 0.)