EVSE - credit ... seems to be more complex than simply AMT

[SanDust]

I'm probably stating the obvious, but leasing the LEAF would eliminate this particular problem. Since the $7,500 tax credit is claimed by Nissan and reduces the capitalized cost in your lease, you have no personal tax consequences for that credit.

That's a very good point, but there are probably better reasons to lease than this, and just because you don't take the EV credit doesn't mean you'll be able to take the EVSE credit. Lots of factors involved in calculating the AMT.

 

[wwhitney]

I understand why you may think that the EV credit is a preference under the AMT but that would be a misinterpretation.

OK, I guess "preference" is a technical term that I don't know the definition of, so I shouldn't have used it. Scratch that terminology; the rest of my post is accurate, as it just references the instructions on the forms.

The AMT establishes a minimum tax which you have to pay. Generally speaking that is a hard floor but there are credits that allow you to pay less than the AMT tax floor. The tax credit for an EV is one of the exceptions.

The credits are applied sequentially. First you apply those credits which can drop your tax below the floor and then you apply those which can't.

That is a good way to look at it and clarifies the calculations the forms are telling you to do.

The thing that was confusing to me and to the OP is that the shorthand people use is "the EV credit is exempt from the AMT". To me that would mean either (a) the EV credit reduces both your regular tax and your minimum tax or (b) the EV credit is applied at the very end of all computations, after all other credits and all comparisons between regular tax and minimum tax. But neither of these are true, so I guess the common wisdom that "the EV credit is exempt from the AMT" is just wrong. Flipping the OP's situation around, if you already are benefiting from certain tax credits that reduce your regular tax to within $7,500 of the AMT, you can't get the full $7,500 from the EV tax credit.

Finally, not to go Fox News on this, and understanding that anyone can be disappointed when they don't get a tax break they think they're going to get, but aren't we getting just a little piggy?

No, these credits are simply an indirect attempt to correct the market failure arising from the externalities of conventional transportation fuel sources. Of course, directly internalizing the externalities by e.g. heavily taxing carbon and other pollution would work better, but tax credits for alternative fuel are a more palatable political option.

Cheers, Wayne

 

[TimeHorse]

the EV credit is applied at the very end of all computations, after all other credits and all comparisons between regular tax and minimum tax

Actually, IMHO, knowing how taxes are typically calculated, that is exactly how it's done: The EVSE credit is taken before the AMT comparison, the EV one after the AMT comparison.

Finally, not to go Fox News on this, and understanding that anyone can be disappointed when they don't get a tax break they think they're going to get, but aren't we getting just a little piggy?

Not everyone lives in New York or California. Granted, Georgia gets $6000 and Oklahoma last I checked gets 50% off the EV, some of us don't get any state / commonwealth kickbacks. Some of us can't even order the car yet. And given the amount I spent on my EVSE since I couldn't cash-and-carry an Aeronvironment and Leviton wasn't anywhere near production I really could use that $2000. Of course, I'm also a) not loosing it, AFAICT since I've no $7500 credit and don't seem to come near AMT at the moment and b) owe more than $2,000 before the credit so just assume submit payment on 15 April and have time to wait. Sucks, though, having my entire credit eaten up by problems with my W4 when I take 0 deductions!

 

[wwhitney]

Actually, IMHO, knowing how taxes are typically calculated, that is exactly how it's done: The EVSE credit is taken before the AMT comparison, the EV one after the AMT comparison.

But that is the whole point of this thread, the EVSE credit calculation "sees" the EV credit, and so you can't say that the EV credit is just taken after the AMT comparison. The EV credit affects the AMT comparison.

Cheers, Wayne

 

[TimeHorse]

But that is the whole point of this thread, the EVSE credit calculation "sees" the EV credit, and so you can't say that the EV credit is just taken after the AMT comparison. The EV credit affects the AMT comparison.

Not that I disagree with the discrepancies of the tax code and as hand-crafting does prove that (Base_Tax - EV > AMT - EV) and (Base_Tax - EV - EVSE < AMT - EV) ? Base_Tax - EV : Base_Tax - EV - EVSE. But the thing about tax preparation is, it's rally written with the idea that it should be as easy as possible. Generally only 3 operations are used when preparing taxes:

• Addition / Subtraction
• Table Lookup or occasionally Multiplication
• Direct comparison of 2 numbers

The last item is where AMT comes in. You calculate your base tax with various deductions and credits, then you calculate your AMT with various deductions and credits and you simply answer the question: is the base tax greater or the AMT greater; you then write in the greater of the two. So from a mathematical point of view, the EVSE credit come before or after that calculation; the EV credit comes before or after that calculation. Either way, the end result is some people can take the EVSE + EV credit and some people are buggered.

 

[gudy]

I'm glad wwhitney looked at the form ... I'm not arguing with the taxes, I'm just saying :
we've been saying on these forums that "you can't take the EVSE credit if you pay even $1 of AMT", while really the rule is, if you are deducting the EV credit the same year that you deduct the EVSE credit (which should be fairly common for a lot of people) :
"You can't take the EVSE credit if your AMT is not AT LEAST 7500 lower than your regular tax" (and actually, if I were to continue the form, I'm guessing it's really 7500 + the credit you want to get (say you paid 2200 for installation, and want 1100 back, then you'd need to have your AMT $8,600 bellow your regular tax).

I would simply like people here to figure it out for real, so that people won't get disappointed like I was. I knew I would not be paying any AMT this year, and yet, I can't take the credit. For me, as I'm renting and knew I'd have to move (although I didn't know it would be that fast), the credit clearly helped me make a decision towards getting the EVSE installed rather than doing l1 charging.

On the flip side, I don't regret the EVSE now that I have it ... it's way more convenient than L1, and I wouldn't have used the car so much with simply L1 charging.

 

[garygid]

TimeH...,
Have you even looked at the form in question, the one for claiming the EVSE credit?

You seem to be talking about how it should or could be done, rather than how it is actually done on the IRS form for 2010 taxes.

Or, am I not understanding?

 

[TimeHorse]

TimeH...,
Have you even looked at the form in question, the one for claiming the EVSE credit?

You seem to be talking about how it should or could be done, rather than how it is actually done on the IRS form for 2010 taxes.

Or, am I not understanding?

I have actually looked at the form but I didn't have my AMT handy so I don't remember off-hand if that has would have been with or without the EV credit.

Here's 8911 in a nutshell:

• Line 1: Enter total cost of EVSE install (IMHO this includes parts AND hired labor)
• Lines 2-11: Ignore (for most of us)
• Line 12: Copy Line 1
• Line 14: (Line 12) * 0.50
• Line 15: $2000 (unless you moved, then you can declare it for BOTH homes: enter $4000)
• Line 16: (Line 14) < (Line 15) ? (Line 14) : (Line 15)
• Line 17: Copy Line 16 (or add the two columns if you're also declaring a Hydrogen Refueling Station)
• Line 18: Copy Line 44 from Form 1040; or 42 from Form 1040NR or regular tax before credits; most people would enter line 44 from 1040 here.
• Line 19a: Ignore (unless you have some overseas credit to add)
• Line 19b: This one's complicated:
  

  Enter the total, if any, credits from Form 1040, lines 48 through 52 (or Form 1040NR, lines 46 through 49); Form 8396, line 9; Form 8859, line 3; Form 8834, line 22; Form 8910, line 21; Form 8936, line 14; and Schedule R, line 22.

  Clearly, since 8936 should have given you your $7500 IIRC but since I didn't qualify for that this year, I didn't need to apply it.
• Line 19c: Copy Line 29 from Form 8834 (this will typically be $0 unless you're also trying to take the credit for a low-speed EV or electric motorcycle, tricycle or bicycle -- Form 8834).
• Line 19d: Add Line 19a + Line 19b + Line 19c
• Line 20: Subtract Line 19d from Line 18 (Line 18 - Line 19d)
• Line 21: Copy Line 33 from Form 6251 or other AMT calculation
• Line 22: Subtract Line 21 from Line 20 (Line 20 - Line 21: difference between real tax and AMT)
• STOP if (Line 22) < 0!
• Line 23: (Line 17) < (Line 22) ? (Line 17) : (Line 22)
• Copy Line 23 to your 1040: Line 53 on Form 1040; Line 50 on Form 1040NR
• And you can't carry over any lost credit onto subsequent tax years:
  

  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.

What this boils down to you're taking an AMT before the EV Credit's been applied and comparing it to your normal tax after you've applied various credits, including the EV credit on Form 8936, which in turn refers to the IRS instructions for the Plug-In Electric Vehicle Credit (IRC 30 and IRC 30D) and from where the $7,500 comes.

Unfortunately, I don't have my taxes handy so I can't check against my AMT at the moment and I'm dragging my feet since I have to pay anyway but it strikes me that it would be more fair to take AMT from after the credits but as it stands:

If Base Tax + EV + EVSE < AMT ? Base Tax + EV + EVSE : AMT + EV seems to be the gruesome truth.

 

[gascant]

My head is spinning after reading all that. All I know is.....when my wife and I bought our Altima Hybrid, the Feds offered a $2500 tax credit. When it was all said and done, we ended up paying AMT that year and it totally wiped out the credit for the Altima. We used TurboTax.

 

[SanDust]

I'm glad wwhitney looked at the form ... I'm not arguing with the taxes, I'm just saying :
we've been saying on these forums that "you can't take the EVSE credit if you pay even $1 of AMT", while really the rule is, if you are deducting the EV credit the same year that you deduct the EVSE credit (which should be fairly common for a lot of people) :
"You can't take the EVSE credit if your AMT is not AT LEAST 7500 lower than your regular tax" (and actually, if I were to continue the form, I'm guessing it's really 7500 + the credit you want to get (say you paid 2200 for installation, and want 1100 back, then you'd need to have your AMT $8,600 bellow your regular tax).

I would simply like people here to figure it out for real, so that people won't get disappointed like I was. I knew I would not be paying any AMT this year, and yet, I can't take the credit. For me, as I'm renting and knew I'd have to move (although I didn't know it would be that fast), the credit clearly helped me make a decision towards getting the EVSE installed rather than doing l1 charging.

I think you're focusing too much on the EVSE credit. Just as there is gross income and net income so there is gross regular tax and net regular tax. Net regular tax is gross regular tax minus those credits not subject to AMT. The important point is that ultimately it's net regular tax not gross regular tax that gets compared to the AMT tax, and if gross regular tax falls below the AMT then you can't take that part of the credits which would reduce net regular tax below the AMT (IOW only part of the credit is disallowed). In this sense the idea that "if you owe one dollar of AMT tax you can't take the credit" is not only weird and technically inaccurate, it's also potentially misleading because the reasonable assumption would be that Form 6251 :lol: compares the AMT to net regular tax whereas it compares it to gross regular tax.

Form 1040 doesn't make clear the distinction between gross and net regular tax. I don't have any inside information why it doesn't, it easily could. My guess is that if Form 1040 made this distinction explicit, every filer would have to calculate their net regular tax but as a practical matter only a small percentage of those filing needs to do it. The good of the many outweigh the confusion for the few. The point here is that all kinds and any number of credits, not just the EV credit, can result in your net regular tax being less than your gross regular tax. So just looking at the EV credit is probably misleading as well. (Put in new windows or something and you'll get the same problem).

As someone pointed out, leasing would have solved this problem for you since even after paying the $500 or whatever acquisition fee you wold be about a thousand bucks ahead. However, all may not be lost. I haven't looked at it, but I'm assuming that you can take a credit in 2011 for moving the charger to your new place. You wouldn't have a "purchase" but you would have "an installation". That would be something to look at since it might save you a few hundred bucks.

 

[TimeHorse]

As someone pointed out, leasing would have solved this problem for you since even after paying the $500 or whatever acquisition fee you wold be about a thousand bucks ahead. However, all may not be lost. I haven't looked at it, but I'm assuming that you can take a credit in 2011 for moving the charger to your new place. You wouldn't have a "purchase" but you would have "an installation". That would be something to look at since it might save you a few hundred bucks.

And what's more, from my reading of 8911, if it's the same next year, all be it with .30 instead in Line 13 column b and $1000 as the limit for one EVSE on Line 15, you could move twice and declare the credit twice: once in the second home for $1000 and once again when moved to the third. Weird but there it is!

 

[wwhitney]

In this sense the idea that "if you owe one dollar of AMT tax you can't take the credit" is not only weird and technically inaccurate, it's also potentially misleading because the reasonable assumption would be that Form 8911 compares the AMT to net regular tax whereas it compares it to gross regular tax.

Umm, if I follow your terminology correctly, form 8911 does compare the AMT to net regular tax.

Cheers, Wayne

 

[SanDust]

Umm, if I follow your terminology correctly, form 8911 does compare the AMT to net regular tax.

Wayne, I have no idea what you're talking about. :shock: Meant Form 6251 obviously (Form 8911 doesn't calculate AMT). Sorry if this confused you.

 

[wwhitney]

Umm, if I follow your terminology correctly, form 8911 does compare the AMT to net regular tax.

Wayne, I have no idea what you're talking about. :shock: Meant Form 6251 obviously (Form 8911 doesn't calculate AMT). Sorry if this confused you.

Lines 18-22 of form 8911 compare your AMT to your net regular tax to determine whether you can take the EVSE credit. That is what started this thread, because in this comparison the $7,500 EV credit reduces your net regular tax and not your AMT.

Wayne

 

[malloryk]

Woo hooo! My federal refund went through today!! Snail-mailed it in on Jan. 27th. Take that TurboTax!

 

[SanDust]

Lines 18-22 of form 8911 compare your AMT to your net regular tax to determine whether you can take the EVSE credit. That is what started this thread, because in this comparison the $7,500 EV credit reduces your net regular tax and not your AMT.

What started this thread is that Gundy looked at Form 6251, filled it out, found that his AMT didn't exceed his gross regular tax, and concluded that since he didn't owe any AMT on Form 6251 he could take the EVSE credits. If you read his posts this becomes obvious at some point. In retrospect it would also be perfectly natural. If you ask what form calculates the AMT the answer will be Form 6251. To my point, it's why people say "If you owe even one dollar of AMT you can't take the EVSE credits". They're looking at Form 6251 as though this compares their regular tax to the AMT. It doesn't. It only compares the AMT to gross regular tax.

The problem is that while it is true that you can't take the EVSE credits if Form 6251 shows that the AMT tax exceeds your gross regular tax, it doesn't follow that you CAN take the credits if Form 6251 shows that the AMT tax is less than your gross regular tax. That's because you can only take credits subject to the AMT to the extent that your net regular tax exceeds the AMT tax.

In this regard, by saying "form 8911 compares your AMT to your net regular tax to determine whether you can take the credit" just continues perpetuating the myth that "if owe one dollar of AMT you can't take the credit". This is simply wrong. You CAN take the credit even if you owe AMT, it's that the credit may be limited. For example. Your net regular tax is $11,499. Your AMT is $10,000. Your credit is $1,500. You're wrong in suggesting that you won't be able to take the credit and that your tax will be $11,499. You will be able to take $1,499 of the credits and your tax will be $10,000, which means you will be paying AMT and be taking the credits.

It helps if you ignore the forms. The substance is the tax code. The forms are just a way of presenting the substance. They could be different. For example, Form 1040 could create a separate line for net regular tax and Form 6251 could use that to compare the AMT tax to the net regular tax. Alternatively Form 6251 could simply calculate the AMT and Form 1040 could compare that to your net regular tax. There are probably a thousand alternatives. It doesn't work this way for practical reasons and maybe that's a bad call but the forms are just forms. In the end it doesn't matter because regardless of how the forms work the answer will be the same. Once you understand the concepts the forms are easy to understand. If you don't then the forms can be confusing.

 

[wwhitney]

First, let me say that I think we both agree on the caclulations involved in tax, AMT, and various credits and their interactions with the AMT. So what remains is how to describe those calculations.

In this regard, by saying "form 8911 compares your AMT to your net regular tax to determine whether you can take the credit" just continues perpetuating the myth that "if owe one dollar of AMT you can't take the credit". This is simply wrong. You CAN take the credit even if you owe AMT, it's that the credit may be limited.

I don't agree that it is a myth. For most people "owing the AMT" would mean that the result of Form 6251 is positive (not zero), and you enter this number as AMT on Form 1040. In that case you can't take the EVSE credit.

For example. Your net regular tax is $11,499. Your AMT is $10,000. Your credit is $1,500. You're wrong in suggesting that you won't be able to take the credit and that your tax will be $11,499.

No one has suggested that. As you point out, instead your credit will be limited by $1. Now you could call that paying $1 of AMT, and you'd be correct in that if the AMT went away, you'd owe $1 less in tax. But that's not the usual terminology, and your tax forms will show $0 in AMT.

It helps if you ignore the forms.

I agree that it helps conceptually to understand what is going on, but you have to check that against the forms, and the forms determine the terminology. I got interested in this thread because I had heard "the EV tax credit is exempt from the AMT". I took that to mean, conceptually "the EV tax credit is invisible to the AMT, and in all cases your net tax after the EV credit will be $7,500 less than your net tax without the EV tax credit (if that is at least $7,500). " However, I found out from this thread that isn't true.

Cheers, Wayne

 

[TimeHorse]

Alright, folks, I've read Title 26(A)(1)(A)(IV)(B)(30C) and it turns out that it really just comes down to the text in Paragraph (c)(2)(C), which effectively states that you compare your Regular Tax with Credits to the AMT before Credits. Case closed.

And if you want the full skinny (including the Form 8911 instructions I posted earlier in this thread): read this: The EVSE Tax Credit a.k.a. The Alternative Fuel Vehicle Refueling Property Credit.

 

[harryjpowell]

What it comes down to, it if you only take the form 8936 7,500 credit on line 53, no 8911, no EVSE or other form. The IRS may reduce the 7500 amount on line 53 for no discernible reason. We didn't owe any AMT on TT but They, the IRS, stated in a letter:

"We changed the total credits on line 54 of your 1040. Some credits are limited to the difference between your tax before credits and the tentative minimum tax from Form 6251, AMT-individuals. Although you were not liable for this additional tax, your credits were still subject to the limitations."

Even on the 6251 there is nothing that says hey go change a credit on line 54 later on the 1040.

Someone please show me the form that limits the 8936 credit!


So credit taker beware, you may see this reduced...

 

[TimeHorse]

What it comes down to, it if you only take the form 8936 7,500 credit on line 53, no 8911, no EVSE or other form. The IRS may reduce the 7500 amount on line 53 for no discernible reason. We didn't owe any AMT on TT but They, the IRS, stated in a letter:

"We changed the total credits on line 54 of your 1040. Some credits are limited to the difference between your tax before credits and the tentative minimum tax from Form 6251, AMT-individuals. Although you were not liable for this additional tax, your credits were still subject to the limitations."

Even on the 6251 there is nothing that says hey go change a credit on line 54 later on the 1040.

Someone please show me the form that limits the 8936 credit!


So credit taker beware, you may see this reduced...

Okay, yes, 8911 you probably won't qualify but I'd fill it out for grins since the form will show you when you fill it out you qualify for $0 credit because the AMT calculation is done right on the form.

As for Form 8936, as you know it's rather simple. I just went over it and no, it does not bring in the value from Form 6251 like Form 8911 does. It simply instructs you to take the value you calculate, the $7500 credit, and compare it to total tax due - other credits and tell you to write the lesser of those in the box on Form 1040 and since the agent told you line 54 this is before the final AMT calculation on Form 1040. So no, the AMT doesn't enter into it. If that's what they're saying, first ask for clarification, then ask for an appeal and finally call your congressperson. I guess you just got a noob auditor.