Author Topic: Electric Car Tax Credit  (Read 695 times)

AdrianC

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Electric Car Tax Credit
« on: July 08, 2018, 10:45:15 AM »
Considering a new plug in hybrid (Pacifica van). We understand the federal $7500 tax credit is nonrefundable, so to get the full credit we need $7500 in federal tax liability. With the new tax law we currently will have almost no federal tax liability this year.

What I am unsure about is:
1. I'm self employed. Can the tax credit count against self employment tax? Doubt it, but worth asking.
2. Does the tax credit reduce our MAGI? I could generate enough income to get the tax liability with client invoicing timing. I don't want to increase our MAGI, though, and mess up our Obamacare subsidy.

TIA.

AdrianC

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Re: Electric Car Tax Credit
« Reply #1 on: July 09, 2018, 07:31:17 AM »
No on both questions.

Increasing our income will increase our MAGI and to do it enough to use up the $7500 electric car tax credit would result in us going over the 400% of the federal poverty level:

https://obamacarefacts.com/federal-poverty-level/

We wouldn't qualify for ACA premium subsidies, and would lose about $8K.

About the tax credit:
https://www.taxact.com/support/1250/2017/form-8936-qualified-plug-in-electric-drive-motor-vehicle-credit-non-refundable-credit

The Qualified Plug-in Electric Drive Motor Vehicle Credit is a non refundable credit. A non refundable credit can reduce your tax liability to 0 (zero), however it cannot result in a refund. What this means is if you qualify for a $350 credit and your tax liability is $200, you will only receive a $200 credit on your return. If your tax liability is zero you would not receive the credit at all, even though you are otherwise eligible for it.

DavidAnnArbor

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Re: Electric Car Tax Credit
« Reply #2 on: July 17, 2018, 07:09:10 PM »
Do you use your vehicle for business use in your self-employed business?  If so then part of your tax credit can be used for business use, converted into a general business tax credit, and carry forward for 20 years.

AdrianC

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Re: Electric Car Tax Credit
« Reply #3 on: July 18, 2018, 04:30:29 AM »
Thanks. The hybrid wouldn't be for business use. I have another car already partially depreciated for business use. In any case, I'm trying to wind down the business...that FIRE thing.

We decided to get another Honda Odyssey van - not a hybrid. The last one has been great for 11 years. We trust this new one will be too.

sokoloff

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Re: Electric Car Tax Credit
« Reply #4 on: July 18, 2018, 05:29:48 AM »
For other posters in this situation, the “solution” is to lease the car, letting the leasing company take the federal credit, and then buying out the lease at the end (or not, as you decide).

DavidAnnArbor

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Re: Electric Car Tax Credit
« Reply #5 on: July 18, 2018, 12:59:10 PM »
For other posters in this situation, the “solution” is to lease the car, letting the leasing company take the federal credit, and then buying out the lease at the end (or not, as you decide).


Does the leasing car company automatically include that federal tax credit when giving you the buyout ?

sokoloff

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Re: Electric Car Tax Credit
« Reply #6 on: July 18, 2018, 01:05:06 PM »
For other posters in this situation, the “solution” is to lease the car, letting the leasing company take the federal credit, and then buying out the lease at the end (or not, as you decide).
Does the leasing car company automatically include that federal tax credit when giving you the buyout ?
They treat it more like a cap cost reduction than a buyout credit, but yes, it’s baked into the numbers.

DavidAnnArbor

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Re: Electric Car Tax Credit
« Reply #7 on: July 18, 2018, 01:07:55 PM »
For other posters in this situation, the “solution” is to lease the car, letting the leasing company take the federal credit, and then buying out the lease at the end (or not, as you decide).
Does the leasing car company automatically include that federal tax credit when giving you the buyout ?
They treat it more like a cap cost reduction than a buyout credit, but yes, it’s baked into the numbers.

Initially I looked into this idea with a Nissan Leaf but the dealerships I talked to regarding this had no idea what I was talking about, and weren't willing to find anything out.

AdrianC

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Re: Electric Car Tax Credit
« Reply #8 on: July 18, 2018, 02:15:24 PM »
For other posters in this situation, the “solution” is to lease the car, letting the leasing company take the federal credit, and then buying out the lease at the end (or not, as you decide).
Does the leasing car company automatically include that federal tax credit when giving you the buyout ?
They treat it more like a cap cost reduction than a buyout credit, but yes, it’s baked into the numbers.

Interesting. I did a comparison on Chrysler's site:

2018 PACIFICA HYBRID TOURING PLUS
Down $6989
ADJUSTED CAPITALIZED COSTS $33,351 (not including any tax credit)
LEASE FOR $532 per month for 36 months

2018 PACIFICA TOURING L PLUS (non-hybrid)
Down $4039
ADJUSTED CAPITALIZED COSTS $33,351
LEASE FOR $361 per month for 36 months

Same cap cost, much higher payment for the hybrid. I'm guessing the residual on the hybrid is expected to be really bad. I suspect the $7500 tax credit is not taken into account.