[TurtleBoy]

Originally Posted by RickObe

Your binding contract would have to be dated, and nonrefundable deposit made, before August 16, 2022. Unless you can backdate things to make it appear so, the binding contract isn't going to help if the car is put in service after 12/31/22.

And the deposit has to be at least 5% of the purchase price. I would be surprised if there are more than a handful of folks that are able to take advantage of the Transition rule, probably only the Fiskar and Rivian folks.

[leightos]

Originally Posted by TurtleBoy

And the deposit has to be at least 5% of the purchase price. I would be surprised if there are more than a handful of folks that are able to take advantage of the Transition rule, probably only the Fiskar and Rivian folks.

yes sir, thanks for reminding me of that tidbit. I talked to CA, once I get the VIN, I know I'll want the car, so I doubt I'll back out, so 5% is not an issue.
Once I get the repurchase from BMWNA, that will more than cover this. I planned to put alot down, or buy in ca$h anyway.

[TurtleBoy]

Originally Posted by leightos

yes sir, thanks for reminding me of that tidbit. I talked to CA, once I get the VIN, I know I'll want the car, so I doubt I'll back out, so 5% is not an issue.
Once I get the repurchase from BMWNA, that will more than cover this. I planned to put alot down, or buy in ca$h anyway.

As mentioned, you can no longer use the Transition rule, you will need to take delivery before the New Year to get the credit.

[Kief]

@TurtleBoy

So let's say you adjust your federal withholding throughout the year and you overpaid $1k, would you get a refund of $8500 ($7500 tax credit plus the $1k you overpaid)?

[TurtleBoy]

Originally Posted by Kief

@TurtleBoy

So let's say you adjust your federal withholding throughout the year and you overpaid $1k, would you get a refund of $8500 ($7500 tax credit plus the $1k you overpaid)?

What you owe when you do your taxes has no effect on the credit. It is the amount on 1040 line 18 (as well as any other personal credits) that determines whether you can take the EV credit or not. Line 18 is the tax based on your taxable income plus any tax from Schedule 2.

[Kief]

Originally Posted by TurtleBoy

What you owe when you do your taxes has no effect on the credit. It is the amount on 1040 line 18 (as well as any other personal credits) that determines whether you can take the EV credit or not.

No I get that. If your tax liability is $7500 or more you would qualify for the credit.

Example: $20k tax liability, then reduced by $7500, so $12500 tax liability. But let's say you adjusted your withholding throughout the year and already paid $20k, would you then get $7500 as a refund?

[Kief]

Originally Posted by NickJ

The way I understand it...the $7500 is a tax credit, not a tax refund. If you owe $5000 before the credit is applied, the $7500 would go towards that debt and you would not receive the remaining balance as a refund. Everyone's situation is different, but they have stated that you will not receive a tax refund (or check) for any unused portion of the credit.

Right, I guess I'm trying to figure out if you would get that $7500 back if you already paid throughout the year, and overpaid

[eelnoraa]

Originally Posted by Kief

No I get that. If your tax liability is $7500 or more you would qualify for the credit.

Example: $20k tax liability, then reduced by $7500, so $12500 tax liability. But let's say you adjusted your withholding throughout the year and already paid $20k, would you then get $7500 as a refund?

In your example yes, you will get $7500 back

[KParks]

Originally Posted by Kief

Right, I guess I'm trying to figure out if you would get that $7500 back if you already paid throughout the year, and overpaid

That is correct. Lets just do a simple example so everyone understands taxes...

Lets say your income is $150k for 2022 and over the course of the year you had $40k withheld in federal taxes (because, assuming you are a normal salaried employee of a company that is pretty much always how it works).

Then come April 15 when you do your federal taxes it turn out your federal tax liability for 2022 was only $35k (because withholding is usually on the conservative side because you'll get your $10k SALT deduction, mortgage interest deduction if you own house, maybe you have more dependents, etc.)!

As a result you are getting a refund of $5k ($40k withheld but you only ended up owing $35k)! However, the fact that you got a refund of $5k has no impact on what your TAX LIABILITY was for 2022 (a refund just means that you had too much in taxes withheld throughout the year). And in this scenario your tax liability (after all adjustments except for the EV tax credit) was well over $7500 and so you'll get the full value of the $7500 tax credit.

Technically what happens with the EV tax credit is that when you calculate your taxes (same as above) you have a tax liability of $35k (before the EV tax credit), that gets reduced to $27.5k after the EV tax credit. This $27.5k is then compared to the $40k that you had withheld over the course of the year and you end up with a tax refund of $12.5k (instead of the $5k refund that you would have received without the EV tax credit).

[Kief]

Originally Posted by KParks

That is correct. Lets just do a simple example so everyone understands taxes...

Lets say your income is $150k for 2022 and over the course of the year you had $40k withheld in federal taxes (because, assuming you are a normal salaried employee of a company that is pretty much always how it works).

Then come April 15 when you do your federal taxes it turn out your federal tax liability for 2022 was only $35k (because withholding is usually on the conservative side because you'll get your $10k SALT deduction, mortgage interest deduction if you own house, maybe you have more dependents, etc.)!

As a result you are getting a refund of $5k ($40k withheld but you only ended up owing $35k)! However, the fact that you got a refund of $5k has no impact on what your TAX LIABILITY was for 2022 (a refund just means that you had too much in taxes withheld throughout the year). And in this scenario your tax liability (after all adjustments except for the EV tax credit) was well over $7500 and so you'll get the full value of the $7500 tax credit.

Technically what happens with the EV tax credit is that when you calculate your taxes (same as above) you have a tax liability of $35k (before the EV tax credit), that gets reduced to $27.5k after the EV tax credit. This $27.5k is then compared to the $40k that you had withheld over the course of the year and you end up with a tax refund of $12.5k (instead of the $5k refund that you would have received without the EV tax credit).

Thanks. The only reason I was overthinking it was bc I thought I read someplace that if you overpaid on your liability you wouldn't receive the credit, which obviously makes no sense. Thanks again everyone

[TurtleBoy]

Originally Posted by Kief

No I get that. If your tax liability is $7500 or more you would qualify for the credit.

Example: $20k tax liability, then reduced by $7500, so $12500 tax liability. But let's say you adjusted your withholding throughout the year and already paid $20k, would you then get $7500 as a refund?

As I said, what you owe when you file your taxes is of no consequence. It is based on line 18. If that is greater than the 7,500 then you would get the full credit and it is refundable.

[TurtleBoy]

Originally Posted by NickJ

The way I understand it...the $7500 is a tax credit, not a tax refund. If you owe $5000 before the credit is applied, the $7500 would go towards that debt and you would not receive the remaining balance as a refund. Everyone's situation is different, but they have stated that you will not receive a tax refund (or check) for any unused portion of the credit.

No, this is not correct. See explanation above.

[TurtleBoy]

Originally Posted by Kief

Thanks. The only reason I was overthinking it was bc I thought I read someplace that if you overpaid on your liability you wouldn't receive the credit, which obviously makes no sense. Thanks again everyone

Unfortunately many folks have posted that in the past and then people must correct them. When not corrected then it can mislead people.

[Lhshockey24]

Originally Posted by TurtleBoy

Unfortunately many folks have posted that in the past and then people must correct them. When not corrected then it can mislead people.

I’m still shocked, after all these years, how many amateur accountants come into car message boards and spew misinformation about the $7,500 EV tax credit. As long as you owed over $7,500 in taxes throughout the year (meaning you made about $40k+), then you get the $7,500. If you didn’t work and didn’t have any income to report, and owed no taxes, then you aren’t going to get $7,500. Really simple stuff people.

[PAuser]

One more question regarding the credit for spouses filing jointly. Does it matter to who of the two we register the car?

It's my understanding, that in order to be eligible for the credit total tax liability must be more than $7500. So if the car is registered to a partner without sufficient income, but total tax liability is more than $7500, I believe we are still eligible for the credit. Am I correct or it does matter to who we register the car?

[KParks]

Originally Posted by NickJ

The way I understand it...the $7500 is a tax credit, not a tax refund. If you owe $5000 before the credit is applied, the $7500 would go towards that debt and you would not receive the remaining balance as a refund. Everyone's situation is different, but they have stated that you will not receive a tax refund (or check) for any unused portion of the credit.

If your tax liability for the year was really only $5000 that is correct, but tax liability IS NOT what you pay on April 15 (and this is where so many people get confused).

What you pay on April 15th is only the DIFFERENCE between what your tax liability for the prior year was and the amount that you have already paid in taxes for the prior year (generally already paid because they were withheld from your paycheck or because you have non-withholding income in which case you should be (and probably were) making quarterly estimated tax payments).

So yes, if you really only had $5000 in tax liability for the year (because you only made, I don't know, $30k of income?, for the year) then you wouldn't be able to get the full value of the EV tax credit... but really how many people are buying a ~$70k+ car without at least that level of taxable income (which could even be passive income and/or social security if you are retired). But sure, it could happen, so when the IRS puts out FAQs they have to give all of those disclaimers and confuse people.

[TurtleBoy]

Originally Posted by PAuser

One more question regarding the credit for spouses filing jointly. Does it matter to who of the two we register the car?

It's my understanding, that in order to be eligible for the credit total tax liability must be more than $7500. So if the car is registered to a partner without sufficient income, but total tax liability is more than $7500, I believe we are still eligible for the credit. Am I correct or it does matter to who we register the car?

You would still be eligible for the credit since you are filing jointly since your tax liability is greater than $7,500. Which name the vehicle is registered in doesn't matter.

[s0nu]

Sorry to beat this to a pulp, but this is confusing even in this thread

Is it the understanding that if you take delivery by the end of the year, you are eligible for the credit, but not if you take delivery after January 1 (even if you meet the income and MSRP limits).

I was planning to order one and take delivery in January so that the 7500 comes off the upfront price as opposed to a refund in 2024, but if the credit is going away, I may just pick one up off the lot as my dealer just got a bunch in.

[TurtleBoy]

Originally Posted by s0nu

Sorry to beat this to a pulp, but this is confusing even in this thread

Is it the understanding that if you take delivery by the end of the year, you are eligible for the credit, but not if you take delivery after January 1 (even if you meet the income and MSRP limits).

I was planning to order one and take delivery in January so that the 7500 comes off the upfront price as opposed to a refund in 2024, but if the credit is going away, I may just pick one up off the lot as my dealer just got a bunch in.

The 45e will not be eligible for a credit starting next year from all of the information we have seen.

As an aside, the immediate credit (taken from the dealer) does not start until 2024.

[RickObe]

Originally Posted by s0nu

I was planning to order one and take delivery in January so that the 7500 comes off the upfront price as opposed to a refund in 2024, but if the credit is going away, I may just pick one up off the lot as my dealer just got a bunch in.

If you purchase in 2022, the credit will apply to your 2022 taxes and you will receive the refund (or reduction in what you owe) in 2023 when you file your 2022 tax return.

[bmwakmg]

Maybe this has already been discussed - So I am hearing the dealer can give a Purchase Agreement based on the VIN received (which we can get at 150 stage) - and then use that to claim credit for tax year 2022 in 2023 filing. Is that correct?

[gqxxflip]

Originally Posted by bmwakmg

Maybe this has already been discussed - So I am hearing the dealer can give a Purchase Agreement based on the VIN received (which we can get at 150 stage) - and then use that to claim credit for tax year 2022 in 2023 filing. Is that correct?

I’m wondering that as well.

My pre approved loan (prior to rates rising) is only good for up to 90 days, but my bank says they can do the paperwork even if I don’t take delivery before 90 days so that I can keep my low rate. My bank did suggest to hold out as long as possible prior to doing that though.