Federal tax credit - Is it dollar for dollar?

[NurStrom]

I am curious how e-Golf purchasers have made out with the federal tax credit.

Is the $7500 credit a dollar for dollar credit? Or does it just reduce your tax liability?

For example, if I am claiming the standard deduction and my end of year tax is say $1000 that I owe. Does that mean that I will get a refund of $6500?

Appreciate your comments...

 

[Verkehr]

It reduces your total liability as low as $0 but won't go negative regardless of how much you overpaid or underpaid during the year.

Someone who pays $6500 in federal taxes for the year will leave $1000 on the table, getting only that $6500 back.

 

[KurtManz]

Taxes are fun.... not!...

As far as I understand it... and assuming a 'simple and hypothetical' tax situation:

1. Start with Adjusted gross income (all the income you have minus some adjustments)... for easy math assume $100,000
2. minus Deductions/exceptions... for simplicity assume you take a standard deduction of $6,000
3. Your taxable income is then $94,000.
4. The tax rate is 28%, so the tax due is: ~$26,000 <-- This number must be bigger than the credit of $7,500
5. Now you apply the tax you already paid (Every paycheck withholds some tax based on your W4) AND the credit


So if the Tax that was withheld was $25,000 then you'd owe $1,000 back.

But if you bought an e-car that year, and that car qualifies for the credit of $7,500 then you remove that from the tax due, which would make it $18,500
This means you get $6,500 back instead.

do notice... the tax due must be bigger than the credit... you're not allowed to go negative on that number. If you don't owe enough tax then I think you can carry over the difference to the next year.

ymmv, I'm not a tax lawyer ... I use one of the common tax sw packages. :mrgreen:

 

[RonDawg]

Also keep in mind that depending on your tax situation, you may not get the full $7500 credit. One example already mentioned is that your tax liability for the year you bought the car is less than $7500. Another is being subject to AMT.

The only way I know of for sure to get the full amount is to lease, as VW Credit passes the full $7500 credit towards the price of the car at the time of lease inception. Most if not all VW's lease specials for the eGolf incorporate the credit already. You can then turn around and buy out the lease.

 

[NurStrom]

It all makes sense... Thanks for commenting.

 

[NurStrom]

Now that I have time to tinker around with TurboTax.
Currently without the e-Golf entered I have a refund of a grand.

I just entered a notional new e-Golf in the deductions section of energy efficient vehicles and TurboTax calculated the full $7500 credit which made the refund $1000+7500=$8500 . I am not AMT.

 

[Unbeliever]

do notice... the tax due must be bigger than the credit... you're not allowed to go negative on that number. If you don't owe enough tax then I think you can carry over the difference to the next year.

Nope, the EV credit is not a carry-forward credit. You only get 1 year to use as much of it as you are able to.

 

[solarEV]

related question: If I buy two EV's in one year can I get two 7500 federal tax credits in the same year?

 

[miimura]

related question: If I buy two EV's in one year can I get two 7500 federal tax credits in the same year?

Yes, the tax you owe is the only limit to your ability to take EV tax credits.