$7,500 Reduction in Tax Liability Question

[shay]

Here's a thought, if you have any doubt whether you will qualify for the full credit and you have any appreciated positions where you can book some long term capital gains, go ahead and do the sale in 2012, then rebuy the asset if you want. Sort of like a wash sale in reverse

With that caveat about "tax advice from random people" noted, I will mention that another strategy, which I am using, is to convert some money from a regular IRA to a Roth IRA. That causes the money to become taxable income in the year the conversion is made (meaning by December 31st for the 2011 tax year).

The Roth conversion is a good strategy. Nice. Selling and rebuying the asset is a little tricky. This isn't like a "wash sale" it could be a "wash sale". If you rebuy the asset within 30 days for tax purposes the sale never happened and there is no recognized gain. Sometimes you can get around this by buying a similar asset. For example, a total stock market index fund might be made up of an S&P index fund and an extended market index fund. You could sell the total market index and buy the other two in the right proportions on the same day without triggering the wash rules.

I think this is BTW what Occupy Wall Street is all about. That's not a criticism of anyone taking advantage of tax loopholes though. If the loophole is there then by all means take it. Manipulating transactions to minimize taxes is no more morally corrupt than taking a CARB rebate even if you don't need it.

You might want to read the IRS publication about wash sales: http://www.irs.gov/publications/p550/ch04.html#en_US_2010_publink100010601" onclick="window.open(this.href);return false;

 

[garsh]

I prefer to go back to the rates under Clinton, when the economy was humming, jobs were being created and the debt disappeared.

Ah yes! Clinton in the whitehouse, Republicans controlling both houses of Congress. A government shutdown will do a lot to help the budget deficit. Good times!

 

[thankyouOB]

on the IRA to ROTH conversion: just be sure that the transfer is complete by 12/31/11.
You can recharacterize any overage prior to filing 2011 taxes or 4/15/12; whichever comes first.
I am not sure what the recharacterize date is if you get an extension.

 

[garsh]

on the IRA to ROTH conversion: just be sure that the transfer is complete by 12/31/11.

For those of us who will be purchasing in 2012, will we still be able to do the conversion next year?

 

[thankyouOB]

on the IRA to ROTH conversion: just be sure that the transfer is complete by 12/31/11.

For those of us who will be purchasing in 2012, will we still be able to do the conversion next year?

there used to be an agi limit of 100k. that was removed for last year and this. I dont know about next year. I dont agi over 100k.
I am not one of the 2%.
er sorry....I cked the tables. 100k is the 90th percentile.

 

[dgpcolorado]

For those of us who will be purchasing in 2012, will we still be able to do the conversion next year?

Yes. Regular IRA to Roth IRA conversions are unlikely to go away for lower income folks anytime soon. But please be aware that Congress could get rid of the $7500 tax credit if they so choose and can attach it to a bill that is "veto-proof". (I consider this unlikely for next year, but my "crystal ball" is no better than that of anyone else, I would guess.)

there used to be an agi limit of 100k. that was removed for last year and this. I dont know about next year. I dont agi over 100k.
I am not one of the 2%.

Anyone with an AGI ("Adjusted Gross Income", for those who aren't familiar with the abbreviation) of $100K would easily qualify for the EV tax credit. Unless they are affected by the Alternative Minimum Tax, which is another issue entirely (AMT folks should probably lease the LEAF).