Author Topic: Electric Car Tax Credit  (Read 175 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.