Ford EV Tax Credits May Run Out Sooner Than Expected

[Yellow Buddy]

Yeah for sure it is..
I just Remember reading different on this forum that if you didn't owe 7500.00 then you get the rest as a refund. Probably wishfull thinking.

People mistaking “owe” and “due” if you paid enough or too much, you can get a refund, but your overall tax liability for the year will have to be greater than $7500 for that to happen.

Situation 1: My tax bill due $5,000. I paid $0 so far. I owe $5,000 when I file.

Situation 2: My tax bill due $5,000, I paid $10, 000 so far. I get a $5,000 refund.

Situation 3: My tax bill due $10,000. I paid $5,000 so far, I owe $5,000.

Situation 3 is the only situation that would be able to claim the full EV tax credit because of the amount due.

The $7,500 acts as a coupon off the due amount but your due amount for this credit can’t go below $0. It doesn’t directly affect the amount you owe or are refunded but that changes based on what’s due

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[FlasherZ]

Came here to say the same thing and try to keep it clear - having to write less than a $7,500 check to the IRS in April does not disqualify you from getting the whole $7,500. You can still get a refund from the IRS in April and be eligible for the full value of tax credit.

When people say they "owe the IRS", a lot of people confuse the "remaining balance due" in April vs. the "total due" (your total tax for the year).

You need at least $7,500 tax, prior to what you paid in already through an employer or other means, to take advantage of the full amount.

 

[greenne]

Came here to say the same thing and try to keep it clear - having to write less than a $7,500 check to the IRS in April does not disqualify you from getting the whole $7,500. You can still get a refund from the IRS in April and be eligible for the full value of tax credit.

When people say they "owe the IRS", a lot of people confuse the "remaining balance due" in April vs. the "total due" (your total tax for the year).

You need at least $7,500 tax, prior to what you paid in already through an employer or other means, to take advantage of the full amount.

Another wrench in the whole process is if you have other tax credits...esp if they are nonrefundable(most are). You very well could have an initial liability of $7500, but if you have kids or any number of tax credits those would be applied so you may really only have a $5000 you actually "owe" in terms actual money changing hands.

Yes you could argue semantics..that you'd use the full EV credit and less of whatever other credit you have, but if its nonrefundable its a moot point as thats money left you can't use.

(The solar credit CAN be rolled forward, so in that case you'd use the full EV and roll solar to next year. But for how long it can be rolled is anyone's guess if the solar credit is allowed to expire).

Of course if Congress would get their act together and simply make the tax credit either a point of sale refundable credit or allow a rollover this would all not be an issue. Sigh.

 

[tankengr]

If you only have $6000 federal tax liability you will only get $6000 of the federal tax credit. That is one of the major issues with the current tax credit. You cannot use federal tax credits to pay state taxes or vice versa.

In your situation, yes--you would only get the $6000 and any state tax credits to pay state taxes.

Check with your tax lady, but here's a possible work around if you don't have sufficient tax liability.

If you have a tax deferred 401k and happen to be at least 59.5 years old, you can create "extra income" (and tax liability) by moving some of your tax deferred 401k to a Roth account. I am retired and living off social security and savings and had no tax liability. In order to take advantage of solar panel tax credits, I used this strategy over several years. This way I am using the tax credit to prepay the taxes that would result from required minimum distributions when they begin.

EV tax credits are different from solar credits in that they must be used in the year of EV purchase and cannot be carried over to future years the way solar credits can be.

 

[vandy1981]

This topic needs to be a sticky on every Ford EV forum. That would probably cut down on the misinformation.

 

[vandy1981]

Yeah for sure it is..
I just Remember reading different on this forum that if you didn't owe 7500.00 then you get the rest as a refund. Probably wishfull thinking.

It's a nonrefundable tax credit, so you cannot create a refund that is greater than your total (edit: federal) tax liability with the EV tax credit.

 

[Tony Burgh]

All speculation should stop until you’ve read the instructions.

 

[greenne]

Check with your tax lady, but here's a possible work around if you don't have sufficient tax liability.

If you have a tax deferred 401k and happen to be at least 59.5 years old, you can create "extra income" (and tax liability) by moving some of your tax deferred 401k to a Roth account. I am retired and living off social security and savings and had no tax liability. In order to take advantage of solar panel tax credits, I used this strategy over several years. This way I am using the tax credit to prepay the taxes that would result from required minimum distributions when they begin.

EV tax credits are different from solar credits in that they must be used in the year of EV purchase and cannot be carried over to future years the way solar credits can be.

I'm in the same situation....although I do have a regular job a portion of my income comes from VA Benefits/military retirement which is non taxable. So "on paper" I have very little taxable income.(I know, 1st world problems). I also have solar credits to use. I'm using a Roth IRA conversion to temporarily boost my taxable income so I can use the credits.

You snooze you lose....

(As an aside I get really angry when people say stuff like "If you can afford a $75k truck you should have enough taxes to get the credit". That's misinformation and intellectually lazy to assume taxable income is 1:1 related to purchasing power).

 

[greenne]

It's a nonrefundable tax credit, so you cannot create a refund that is greater than your total tax liability with the EV tax credit.

Moreover it should be said you cannot create a refund greater than your FEDERAL tax liability.

Any state credit or liability is a whole separate issue and like Ghostbusters you can't cross the streams.

 

[TaxmanHog]

Generally good advice above, but as you can expect I will comment on ANY thread that speaks about this credit to remind our self-employed class of taxpayer that LINE 23 includes a group of taxes for which the EV credit can not be used to reduce the balance, example: your income taxes are low but your SE tax is high, this is not an unusual situation, in my career of 33 years, I've seen many returns where misinterpretation could lead an individual into thinking they will be able to apply the unused portion of EV credits against SE taxes ..... NOT THE CASE...... so be mindful of using the term TAXES OWED (ie NOT line 24)

 

[greenne]

Generally good advice above, but as you can expect I will comment on ANY thread that speaks about this credit to remind our self-employed class of taxpayer that LINE 23 includes a group of taxes for which the EV credit can not be used to reduce the balance, example: your income taxes are low but your SE tax is high, this is not an unusual situation, in my career of 33 years, I've seen many returns where misinterpretation could lead an individual into thinking they will be able to apply the unused portion of EV credits against SE taxes ..... NOT THE CASE...... so be mindful of using the term TAXES OWED (ie NOT line 24)

LOL..SE taxes are a whole different ballgame(BTDT).

As always its been years since I took the basics in a VITA class(militray)..so while I feel reasonably comfortable -- disclaimer-- check with a more qualified tax professional.

 

[TaxmanHog]

LOL..SE taxes are a whole different ballgame(BTDT).

As always its been years since I took the basics in a VITA class(militray)..so while I feel reasonably comfortable -- disclaimer-- check with a more qualified tax professional.

I do not want to leave doubt in anyone's mind, yes the BEST advice is consult a personal tax advisor, internet advice is worth the paper (electrons) it's printed on.

 

[Roy2001]

Ford did not hit 200K in Q2 (I think), which means the full credit is available for the remainder of 2022. It can’t happen any sooner. I don’t really understand this article.

Write an article in order to write an article.

Just like those guys on youtube can talk day and night on a picture, or like those guys release a article of all rumors about new iphone weekly.

To make money.

 

[vandy1981]

Write an article in order to write an article.

Just like those guys on youtube can talk day and night on a picture, or like those guys release a article of all rumors about new iphone weekly.

To make money.

What's worse is when they write an incorrect article based on correct and well-researched original content.

 

[Roy2001]

What's worse is when they write an incorrect article based on correct and well-researched original content.

Be frankly, I hate social media and this kind of news outlets. They are mostly rumor mills contain mush more false info than truth.

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