A couple of years ago, the company I work for gave me some shares. We are a small S corp. I became vested this year and now have to consider the value of the shares as income. I went to TurboTax and using last year's return, tried to estimate our additional tax burden for this year. It looks like we'll be facing about $15k in Fed and another $2k in state taxes. We could put more into our 401k or HSA but that only decreases our AGI, effectively only giving us our tax bracket rate * what we put in.
I currently drive a 1995 Corolla with 160k miles. I use it to commute to work mostly and until now have felt no great need to go newer except for safety considerations. I like not having payments :)
However, I'm thinking now about how to deal with this large tax burden. One way that I have been running numbers for has been the purchase of an electric vehicle since you get tax credits at both the federal and state levels. I compared expenses for insurance and gas and included what I would get if i sell my old car. I chose to do this over a five year window. Here are the two current scenarios I have:
1 - Pay tax bill outright and do nothing else -
- -$17k tax bills
- Total = -$17k
2 - Purchase Leaf, get tax credits, sell Toyota -
- -$27.3k car
- -$17k tax bills
- $9.5k tax credits
- -$2.5k additional insurance
- $4.8k gas savings
- $1k from sale of car
- Total = -$31.5k
So in the end, I'm paying $14.5k for a new car over five years in this scenario. In my mind, this looks like I should just pay the bills and continue driving my Toyota. Is my logic sound?
Are there other ways of dealing with the additional tax burden?
Thanks for any advice.