7,500 Tax Incentive Carry Over

[MatimalND]

I asked my tax man and he says that the $7,500 tax incentive carries overs to the next year if you don't have a high enough tax liability. I just wanted to check with this forum before I pulled the trigger. I would get back $5,000 the first year then the remaining $2,500 the second year.

I am leaning towards buying a 2012 SV since with the $8,500 dealer rebate + $7,500 tax credit I would owe only $11,000 on the car after 3 years if I factor in what my lease payments would be over the 3 years. If I can't get the full tax incentive then this deal isn't as sweet.

Here is the deal offered by the dealer.

$0 down $240 a month on the SV $17,000 Residual. ($9,360 lease payments)

$25,500 + License & Title cash deal.

Thoughts opinions would be appreciated.

 

[ebill3]

I am not a tax expert by any means, but I think you need a new tax person. I am quite certain the tax credit has no provisions for carry over.

But, if you are leasing, Nissan gets the tax credit and should pass it on to you, regardless of your income level.

 

[mwalsh]

I think your tax man is WRONG!

 

[wsbca]

I asked my tax man and he says that the $7,500 tax incentive carries overs to the next year if you don't have a high enough tax liability. I just wanted to check with this forum before I pulled the trigger. I would get back $5,000 the first year then the remaining $2,500 the second year.

I believe your tax man is incorrect. From the instructions for form 8936:

Line 23
If you cannot use part of the personal portion of the credit because of the tax liability limit, the unused credit is lost. The unused personal portion of the credit cannot be carried back or forward to other tax years.

 

[MatimalND]

Thanks for the replies. I will have him double check, up here in ND I doubt he sees many of them. Yea Nissan only gives you $10,500 which includes the $7500 on a lease. If you buy straight out they give you $8,500 but you also get the tax incentive for a net of $16,000. So I would still be $2500 ahead to buy if I really want to keep the car. Or figure out a way to get my boss to double my salary, quit having kids, or win the lottery so I have a bigger tax liability.

I just did some more research, not sure what he is looking at.

Line 23
If you cannot use part of the personal portion of the credit
because of the tax liability limit, the unused credit is lost.
The unused personal portion of the credit cannot be
carried back or forward to other tax years.

 

[davewill]

From Form 8936:

Line 23
If you cannot use part of the personal portion of the credit because of the tax liability limit, the unused credit is lost. The unused personal portion of the credit cannot be carried back or forward to other tax years.

I can't easily see the rules for a business, but for personal taxes it's clear.

 

[MatimalND]

Thanks davewill, I must have found the same information while you where posting. I had hopes that I could make this work.

 

[mwalsh]

Yeah, it's kinda silly that it doesn't roll-over, and it kept me out of the market for a new vehicle last year because I'd figured a tax liability of only $4,000 (ended up owing $4,900).

This year, however, I'm excepting to owe around $8,000, so I'm looking for a PHEV offering the full $7500 tax credit. The only option for that thus far seems to be the Volt, though I've said jokingly that I suppose buying two Ford Energis ($3750 each) wasn't out of the question.

 

[davewill]

Thanks davewill, I must have found the same information while you where posting. I had hopes that I could make this work.

What some people have done is take advantage of the unused part of the credit to transfer money from a traditional IRA to a Roth. That creates taxable income, which the credit then offsets. The money in the Roth is then available sans tax later. Of course, if you don't have a big enough IRA...

 

[Glenn]

A bit confusing, Matimal are you buying or leasing? Others may know better, but I'm pretty sure you don't get the $7,500 tax benefit if you lease, so your question becomes moot at that point anyway.

I am leaning towards buying a 2012 SV since with the $8,500 dealer rebate + $7,500 tax credit I would owe only $11,000 on the car after 3 years if I factor in what my lease payments would be over the 3 years. If I can't get the full tax incentive then this deal isn't as sweet.

 

[mwalsh]

What some people have done is take advantage of the unused part of the credit to transfer money from a traditional IRA to a Roth. That creates taxable income, which the credit then offsets. The money in the Roth is then available sans tax later. Of course, if you don't have a big enough IRA...

That's what we did the year we bought our LEAF...took something like $20k out of my wife's traditional IRA accounts and put it a Roth. Worked out perfectly - ended up owing $8326 in taxes which, with the $7500 and a $1000 tax credit for the one kid still under 17 that tax year, gave us a refund of $174.

 

[MatimalND]

Thanks for the tips, I will see if I can do that.

Regards to the question about leasing/buying. I would like to buy because you get $8500 dealer cash plus the $7500. Lease you only get $10,500 dealer cash that includes your $7,500. I really think I would keep this and have the wife drive it down the road if the technology improves enough to justify buying a another one. I want to get to my cabin 100+ miles one way. Plus the cold in ND really hammers the mileage.

 

[ebill3]

I want to get to my cabin 100+ miles one way. Plus the cold in ND really hammers the mileage.

I assume you know, but just in case - You are not going to get to your cabin without an en-route charge, unless you drive at 35 MPH max, there is no elevation change, no wind, a nice dry warm day, and a new or almost new battery. And even then, there might be some white knuckles.

 

[cwerdna]

^^^
Yep. OP should consult http://www.mynissanleaf.com/viewtopic.php?p=101293" onclick="window.open(this.href);return false;.

Without charging enroute or all the above conditions, forget about it. You need an EV w/longer range or some other car (e.g. ICEV, PHEV, etc.)

 

[mwalsh]

You need an EV w/longer range or some other car (e.g. ICEV, PHEV, etc.)

Ford C-Max Energi or Fusion Energi - $3750 tax credit on either with around 20 miles of EV only range.

 

[MatimalND]

Sorry for the confusion, I want to buy the Leaf, which I would give to the wife when an EV in the future could actually go 100+ miles that doesnt require you to go 35mph on a 70 degree day, with a slight tail wind, and new pavement.

I am trying to max out my tax incentive so buying makes more sense. (I am trying to talk myself into buying a Leaf)

Yea, charging in route is next to impossible in ND unless I stay over at a hotel/friends with a plugin. I would probably be 1 of 5 Leaf's in ND if I pull the trigger. Never plan on taking the Leaf outside of the city.

I am interested in the Ford C-Max hoping the price comes down a little.

 

[JimSouCal]

What some people have done is take advantage of the unused part of the credit to transfer money from a traditional IRA to a Roth. That creates taxable income, which the credit then offsets. The money in the Roth is then available sans tax later. Of course, if you don't have a big enough IRA...

That's what we did the year we bought our LEAF...took something like $20k out of my wife's traditional IRA accounts and put it a Roth. Worked out perfectly - ended up owing $8326 in taxes which, with the $7500 and a $1000 tax credit for the one kid still under 17 that tax year, gave us a refund of $174.

All true on the FED. There will be added taxes to pay on the state if one has state income tax. The lease and quick buy out is the option for some, but in this particular case, sounds like the incentives favor straight purchase.

 

[mwalsh]

All true on the FED. There will be added taxes to pay on the state if one has state income tax. The lease and quick buy out is the option for some, but in this particular case, sounds like the incentives favor straight purchase.

I'm not a tax guy. Heck, I'm not even that smart when it comes to math. But it looks like we maybe would have paid around $900 less in state taxes had we not moved the money. But, hey, CA REALLY needs the cash, so I don't really begrudge it.