Expecting a $4K Federal Rebate on Your FFE? Sorry!

[meyersnole]

This was a known issue and the president wanted to fix this in his budget proposal for 2014, but of course congress was unable to make it happen. 

 

http://insideevs.com/2014-budget-proposal-ups-ev-credit-to-10000-point-of-sale-rebate-thru-2018/

Edited April 14, 2015 at 10:06 PM by meyersnole

[stevedebi]

You are wrong.  Withholding has nothing to do with the credit.  If you have a tax liability of $4K and withhold $4K then you will get that $4K as a refund by using the credit.  If you withhold nothing you will owe no tax by using the credit.  Your financial status is the same in each case.

 

If your tax liability is only $2K and you withhold $4K your maximum tax credit will be $2K--your tax liability.  But you will get your withholding of $4K as a refund.

 

Again, withholding has no effect on whether you can use the credit or not.  Your tax liability determines whether and how much of the tax credit is available to you.

I don't follow you. Lets say that a person withholds taxes such that they will neither owe nor pay taxes at the end of the year. When they file their taxes they will not be able to collect the potential 4K credit because they owe no taxes.

 

If that same person were to reduce their withholdings during the year so that they owe 4K in taxes when filing, then they can use the 4K credit to owe no taxes instead. The difference is that they will have been bringing in more money to their bank during the year. Presumably they will be 4K richer because they didn't send that withholding to the government.

 

Am I missing something?

[murphy]

Yes,  it is not a function of how much you have to pay with your return on April 15.  Your total tax bill must be at least $4001.00 to get the full credit.  Your tax bill is calculated based on how much taxable income you had.  The amount that was withheld from your salary is just a prepayment against that tax bill.  The tax, based on your income, is on line 44 of form 1040.  That number must be at least $4001.00 to get the full tax credit.  The lines that follow line 44 detail other possible credits.  Line 54 is where the credit for the car is entered coming from form 8936.

[JATR4]

I don't follow you. Lets say that a person withholds taxes such that they will neither owe nor pay taxes at the end of the year. When they file their taxes they will not be able to collect the potential 4K credit because they owe no taxes...

 

 

Wrong.  If their tax liability on line 44 is $4,007 and they had withholding of $4,007 they would receive a refund of $4,007.  If they did not withhold during the year and put the money in a bank, they would have $4,007 in a bank.  In either case they get the tax credit on line 54.  The money saved by using the tax credit is either in the bank or in the refund from the government.  The vehicle tax credit can not exceed the tax liability.  The OP had other credits that wiped out the vehicle tax credit.  There is a hierarchy of credits and some reduce the vehicle tax credit.  For example, child and dependent care expenses may reduce the vehicle tax credit.

 

The max vehicle tax credit is $4,007.  Tax programs sometimes need to be overridden to get the extra $6.

 

Let me give you an actual example.  My tax liability for 2013 was $3,806.  Therefore, my vehicle tax credit was also $3,806 since it can't be more than your tax liability.  Therefore, I owed no tax for 2013.  But I had taxes withheld and estimated payments of $2,921.  The IRS sent me a check for $2,921.  If I had a child care expense of $500, the vehicle tax credit would have been reduced to $3,306 but my total tax credit would have still been $3,806 (3306 + 500).

Edited April 15, 2015 at 02:38 AM by JATR4

[lonzo71]

Most of us are just trying to understand so we can help you.

I think thats sometimes part of the problem. The OP was just trying to inform others about his taxes, he really wasnt asking for help about them, just complaining. And he is right, the wording of the "car tax rebate" is wrong! Dont care how or the why, but when you say rebate, that means you get money back no matter what.

Edited April 15, 2015 at 01:51 PM by lonzo71

[JATR4]

I think thats sometimes part of the problem. The OP was just trying to inform others about his taxes, he really wasnt asking for help about them, just complaining. And he is right, the wording of the "car tax rebate" is wrong! Dont care how or the why, but when you say rebate, that means you get money back no matter what.

Can you point out specifically where there is any mention of a "car tax rebate" and can you provide wording that is incorrect?  I have only seen "vehicle tax credit" and don't recall any false wording.

 

I agree that it would be nice if it were a rebate but it isn't.

[stevedebi]

Wrong.  If their tax liability on line 44 is $4,007 and they had withholding of $4,007 they would receive a refund of $4,007.  If they did not withhold during the year and put the money in a bank, they would have $4,007 in a bank.  In either case they get the tax credit on line 54.  The money saved by using the tax credit is either in the bank or in the refund from the government.  The vehicle tax credit can not exceed the tax liability.  The OP had other credits that wiped out the vehicle tax credit.  There is a hierarchy of credits and some reduce the vehicle tax credit.  For example, child and dependent care expenses may reduce the vehicle tax credit.

 

The max vehicle tax credit is $4,007.  Tax programs sometimes need to be overridden to get the extra $6.

 

Let me give you an actual example.  My tax liability for 2013 was $3,806.  Therefore, my vehicle tax credit was also $3,806 since it can't be more than your tax liability.  Therefore, I owed no tax for 2013.  But I had taxes withheld and estimated payments of $2,921.  The IRS sent me a check for $2,921.  If I had a child care expense of $500, the vehicle tax credit would have been reduced to $3,306 but my total tax credit would have still been $3,806 (3306 + 500).

Well, I can't argue with your own experience. But it would appear that folks with more complicated returns would be well advised to check with their CPA when they buy their vehicle, to ensure what happened to the OP is not repeated.

 

Not an issue with me, I'm leasing my vehicle, and the "credit" was applied to the cap reduction cost.

[Fat Fusion]

Is it just me or does anyone else find it odd when people are buying a 30 to 40k car and don't have a federal tax liability of more than 4k? Are these folks paying cash from the trust fund? Just curious.

[Rexracer]

Is it just me or does anyone else find it odd when people are buying a 30 to 40k car and don't have a federal tax liability of more than 4k? Are these folks paying cash from the trust fund? Just curious.

 

This is the thing that confuses me as well.

 

And I haven't seen any advertising incorrectly stating that its a credit, not a rebate, but I think a lot of people just don't understand what that means & a lot of dealers don't know either to properly explain it.

 

[stevedebi]

This is the thing that confuses me as well.

 

And I haven't seen any advertising incorrectly stating that its a credit, not a rebate, but I think a lot of people just don't understand what that means & a lot of dealers don't know either to properly explain it.

Some folks, particularly self employed people, have lots of business expenses that can be deducted or are eligible for other credits. I think that is what got the OP.  For a normal "employed" individual, I suspect they would always have a tax liability.

[seadiel]

Some folks, particularly self employed people, have lots of business expenses that can be deducted or are eligible for other credits. I think that is what got the OP.  For a normal "employed" individual, I suspect they would always have a tax liability.

Also being in California add a 400-500K mortgage/property taxes/family/kids and I can see how some don't have tax liabilities.

[Fat Fusion]

Also being in California add a 400-500K mortgage/property taxes/family/kids and I can see how some don't have tax liabilities.

 

OK, so it sounds like there are situations where you'd not have liability,  But that just speaks to the messed up tax code IMO.  I just bought my first house here in CA so maybe I won't be liable for tens of thousands in Fed tax this year.  I pay about 2k a month in interest on the loan IIRC.   :headscratch:

[Russael]

Does everybody on this forum (except me) make 6 figures or more (aside from those who have retired)? :)

 

For me, my tax liability for 2013 was a whopping 37 dollars after credits.  There's no way I could've claimed a 7500 credit for a Focus Electric (even though it was priced similarly) or a Volt, or a Tesla unless I killed off investing in to my 401k.

 

I put a sizeable down payment on the car with a 6 year note.  I expect to have it gone in 4 or 5 years total though.

 

Fat Fusion:  2k in interest???  Good grief.  My car note and mortgage together is 1100 a month.  2k a month would leave me with nothing left to even eat.

[Hybridbear]

Does everybody on this forum (except me) make 6 figures or more (aside from those who have retired)? :)

 

For me, my tax liability for 2013 was a whopping 37 dollars after credits.  There's no way I could've claimed a 7500 credit for a Focus Electric (even though it was priced similarly) or a Volt, or a Tesla unless I killed off investing in to my 401k.

 

I put a sizeable down payment on the car with a 6 year note.  I expect to have it gone in 4 or 5 years total though.

 

Fat Fusion:  2k in interest???  Good grief.  My car note and mortgage together is 1100 a month.  2k a month would leave me with nothing left to even eat.

We don't make 6 figures... After buying the Energi and claiming our appropriate deductions and credits and the PHEV tax credit we had less than $1200 in tax liability. This is why we leased our Focus EV, we would not have been able to benefit from the full $7500 tax credit. Maybe in a few years we could benefit from the full amount, but not right now.

Edited April 16, 2015 at 02:40 PM by Hybridbear

[seadiel]

Does everybody on this forum (except me) make 6 figures or more (aside from those who have retired)? :)

 

For me, my tax liability for 2013 was a whopping 37 dollars after credits.  There's no way I could've claimed a 7500 credit for a Focus Electric (even though it was priced similarly) or a Volt, or a Tesla unless I killed off investing in to my 401k.

 

I put a sizeable down payment on the car with a 6 year note.  I expect to have it gone in 4 or 5 years total though.

 

Fat Fusion:  2k in interest???  Good grief.  My car note and mortgage together is 1100 a month.  2k a month would leave me with nothing left to even eat.

 

 

6 figures in California specifically in the Bay area/orange county/San Diego would not nearly be as nice as 6 figures in other states. I would guess a 400-500K mortgage would be close to 2k in interest per month.

 

We only had a $900 tax liability so tax credit wouldn't of worked for us either, ended up leasing the vehicle. 

[stevedebi]

Does everybody on this forum (except me) make 6 figures or more (aside from those who have retired)? :)

 

For me, my tax liability for 2013 was a whopping 37 dollars after credits.  There's no way I could've claimed a 7500 credit for a Focus Electric (even though it was priced similarly) or a Volt, or a Tesla unless I killed off investing in to my 401k.

 

I put a sizeable down payment on the car with a 6 year note.  I expect to have it gone in 4 or 5 years total though.

 

Fat Fusion:  2k in interest???  Good grief.  My car note and mortgage together is 1100 a month.  2k a month would leave me with nothing left to even eat.

It is interesting, here in LA, the housing prices are such that it costs a half million to get a basic home in a decent neighborhood.  My wife and I both work, so we get by. I gather you don't live in urban California? The taxes are killer out here. That 500K home would have 10K in annual real estate taxes as well. Then there is up to 9% state taxes and a 9% sales tax. We bring home less than 50% of what we make, including 401K deductions. My daughter starts college next fall and we are going to be sweating out the next few years.

[Russael]

I live in Michigan.  I have a very basic, small home (820 square feet).  How much would a home of that size run in LA, Cali?

 

*goes to realtor.com and looks it up*

 

Well, the short sale listings are about what I paid for my place back in 2008 and the square footage is similar.  Biggest difference is my house was already renovated when I bought it (been noticing it's been kind of sloppy though as more and more things seem to be coming apart).

 

Property taxes for me run about 1700 a year, which will probably make you guys in Cali cry. :)

 

Still, a 414k home in Michigan would run you about 8k in yearly taxes, but that'll buy you a home with 3100 square feet of space.

 

We do have some high rollers in MI, but nowhere near as many as Cali does.  Probaby why things are more expensive out that way.

 

And now this topic is fully derailed. :D

[Fat Fusion]

For reference, the 45 year old 1137 foot house on a 6000 foot lot cost me 620k. But, it's in Silicon Valley and I have a coresponding engineer salary to afford it.

 

Just need to find a good woman to help share the cost!

[Rexracer]

Does everybody on this forum (except me) make 6 figures or more (aside from those who have retired)? :)

 

For me, my tax liability for 2013 was a whopping 37 dollars after credits.  There's no way I could've claimed a 7500 credit for a Focus Electric (even though it was priced similarly) or a Volt, or a Tesla unless I killed off investing in to my 401k.

 

I put a sizeable down payment on the car with a 6 year note.  I expect to have it gone in 4 or 5 years total though.

 

Fat Fusion:  2k in interest???  Good grief.  My car note and mortgage together is 1100 a month.  2k a month would leave me with nothing left to even eat.

 

I need a new accountant if that's all the tax liability you guys have. I don't make 6 figures, have ~1500 a month in mortgage interest, and $3500 in property tax's, plus the 9-10% state tax, and 2 children, PLUS daycare deductions, and max health/cafeteria, donating 10% of pre-tax earnings to charity and I still had  $10k or so in Federal and 4-6k in state tax liabilities.

[stevedebi]

I need a new accountant if that's all the tax liability you guys have. I don't make 6 figures, have ~1500 a month in mortgage interest, and $3500 in property tax's, plus the 9-10% state tax, and 2 children, PLUS daycare deductions, and max health/cafeteria, donating 10% of pre-tax earnings to charity and I still had  $10k or so in Federal and 4-6k in state tax liabilities.

I actually do recommend a tax accountant. Mine costs about 300 bucks, but the first time I used him, the return was several thousand dollars more. I have a fairrly simple return too, with basically the same expenses you have (even the 2 kids and 10% charity). Those tax figures seem high to me.

 

BTW, they can redo your taxes and you can refile to get more money back, if possible. Might be worth trying it this year.

[Rexracer]

I actually do recommend a tax accountant. Mine costs about 300 bucks, but the first time I used him, the return was several thousand dollars more. I have a fairrly simple return too, with basically the same expenses you have (even the 2 kids and 10% charity). Those tax figures seem high to me.

 

BTW, they can redo your taxes and you can refile to get more money back, if possible. Might be worth trying it this year.

 

I have an accountant, thats why I need a new one! ;-)

[flyingcheesehead]

FWIW, in a lease situation, the credit goes to the lessor, not the lessee. 

 

However, when I went to buy an Energi, the $4K was added in as a lease incentive - So I do essentially get it back, without having to deal with the IRS (on that particular thing at least).

[stevedebi]

FWIW, in a lease situation, the credit goes to the lessor, not the lessee. 

 

However, when I went to buy an Energi, the $4K was added in as a lease incentive - So I do essentially get it back, without having to deal with the IRS (on that particular thing at least).

That is how I did mine as well.

[shaggy314]

What this all boils down too is that he had too many deductions to be able to use the tax credit and he is unhappy. This can happen any year, it's just that most people either don't have it happen or if happens enough that they plan. He was neither. Medical and housing (among many other things) can reduce your tax liability to where you lose any tax credit.

 

While it is unfortunate, I'm sure all official Ford materials will say federal tax credit, but misinformed sales people will call it whatever it takes to sell one of those rare to move expensive cars...

 

Withholding only effects how you pay uncle Sam (later, now), not how much. If done early enough he could have done shifting to move things to this tax year (property taxes or medical if possible), but by the time he had the number in a program, it was too late.

 

Should there be a next time, yes, consult somebody or maybe buy Tax software in December to get a rough estimate...

Edited June 1, 2015 at 05:12 AM by shaggy314

[shaggy314]

That is how I did mine as well.

Right since you aren't 'the owner,' no credit for you, BUT a dealer trying to lease it to you will pass it along; they don't have to do it.