Tax credit

[LEAFer]

I do not know the source of information by some posters that you get the $7,500 benefit if you lease. It is not what IRS told me or what appears in this article:

You are correct, Deserstraw, and there's no argument that the information you received and article you quote are correct. When you lease YOU (as an individual) do NOT qualify nor receive the tax credit on your taxes. But Nissan gets the benefit and in some manner passes it along to you at the START of the lease. This allows both a purchaser and a lessee of the LEAF to get a (reasonably) equivalent benefit. The devil is in the details (the residual at the end of the lease term, the money factor, mileage adjustments, disposition fee, etc) as to whether the full $7,500 "savings" are realized by a lessee. And as I said before, other pros and cons of leasing still apply.

 

[Spies]

That will help but I may try to get money from my 401k I know there is a 10% penalty but I could use it to shore up the home budget and get the full tax credit.

Thanks for your reply Gonewild! It give me an a idea for a possible solution for those that may not have enough to use the whole tax credit.

The short story for me is that both my significant other and myself are recently out of work and do not know at this time when we will be working again. Luckily we are both still finically stable enough to choose to buy or lease the Leaf when it is offered to us. If it is offered to us this year we can choose to buy since we have enough income this year to take full advantage of the tax credit. However if we are offered the vehicle after the end of this year buying may not be a frugal option because we may not make enough money in 2011 for the tax credit until you gave me an idea.

I still have a 401k with my previous employer that has a pretty good chunk of change in it. From what I understand I could roll this over into a Roth IRA in 2011 and have a large enough tax liability in 2011 to take full advantage of the tax credit! I suspect one could even do this with a regular IRA to Roth IRA rollover as well.

I know leasing is still an option that may allow us to take advantage of the tax credit in a different way but we still want to keep our options open. Leasing still leaves a bad taste in our mouth after having our Honda EV Plus taken away. Seeing what may have even been the Honda EV Plus we had about to be shredded in "Who Killed the Electric Car?" is something we want to avoid.

 

[LeafHopper]

If you have a conventional IRA (or other tax-deferred accounts like 401K), you can roll this money into a Roth IRA. This will increase your taxable income and tax so that you can take the entire tax credit. If you have planned your retirement well, you will save by not paying future taxes on not only the money moved, but also any earnings on this money. I call this Win/Win. But it is not for everyone. Just people with large conventional IRA or tax-deferred savings accounts.

 

[planet4ever]

I know leasing is still an option that may allow us to take advantage of the tax credit in a different way but we still want to keep our options open. Leasing still leaves a bad taste in our mouth after having our Honda EV Plus taken away. Seeing what may have even been the Honda EV Plus we had about to be shredded in "Who Killed the Electric Car?" is something we want to avoid.

I'm with you on that one. At this point I favor a lease for myself, mostly because I have no idea where the EV market will be three years from now. But there is no way that I will sign a lease unless it has a guaranteed purchase option at the end.

 

[Desertstraw]

Here is another thought? What will be the street price of a Leaf when they start making deliveries. Surely some people with enough income tax will realize that they can make money by flipping an electric car. Are we going to find offers on E-Bay for new Leaves at lower than $32,780. How much will insurance companies reimburse you if you total your car? In states which tax cars on the basis of value, will the tax be different? You can say that they can tax on the basis of MSRP for all but what if E-Bay makes the real price less?

 

[LEAFer]

I know leasing is still an option that may allow us to take advantage of the tax credit in a different way but we still want to keep our options open. Leasing still leaves a bad taste in our mouth after having our Honda EV Plus taken away. Seeing what may have even been the Honda EV Plus we had about to be shredded in "Who Killed the Electric Car?" is something we want to avoid.

I'm with you on that one. At this point I favor a lease for myself, mostly because I have no idea where the EV market will be three years from now. But there is no way that I will sign a lease unless it has a guaranteed purchase option at the end.

+1

 

[Gonewild]

In states which tax cars on the basis of value, will the tax be different? You can say that they can tax on the basis of MSRP for all but what if E-Bay makes the real price less?

Arizona has a low license tax on EV where on a normal car you are correct over $500

 

[EVDRIVER]

That will help but I may try to get money from my 401k I know there is a 10% penalty but I could use it to shore up the home budget and get the full tax credit.

Thanks for your reply Gonewild! It give me an a idea for a possible solution for those that may not have enough to use the whole tax credit.

The short story for me is that both my significant other and myself are recently out of work and do not know at this time when we will be working again. Luckily we are both still finically stable enough to choose to buy or lease the Leaf when it is offered to us. If it is offered to us this year we can choose to buy since we have enough income this year to take full advantage of the tax credit. However if we are offered the vehicle after the end of this year buying may not be a frugal option because we may not make enough money in 2011 for the tax credit until you gave me an idea.

I still have a 401k with my previous employer that has a pretty good chunk of change in it. From what I understand I could roll this over into a Roth IRA in 2011 and have a large enough tax liability in 2011 to take full advantage of the tax credit! I suspect one could even do this with a regular IRA to Roth IRA rollover as well.

I know leasing is still an option that may allow us to take advantage of the tax credit in a different way but we still want to keep our options open. Leasing still leaves a bad taste in our mouth after having our Honda EV Plus taken away. Seeing what may have even been the Honda EV Plus we had about to be shredded in "Who Killed the Electric Car?" is something we want to avoid.

I explored this as well, in some cases the tax liability needs to be spit over two sequential years not all in one as in the case of SEP IRA to ROTH.

 

[LEAFer]

I explored this as well, in some cases the tax liability needs to be spit over two sequential years not all in one as in the case of SEP IRA to ROTH.

"needs to be spit[sic]" = "MUST be split" or you have the OPTION to split (to average out your out-of-pocket cost) ?

 

[EVDRIVER]

I explored this as well, in some cases the tax liability needs to be spit over two sequential years not all in one as in the case of SEP IRA to ROTH.

"needs to be spit[sic]" = "MUST be split" or you have the OPTION to split (to average out your out-of-pocket cost) ?

Must be split and added over two years not in one. Transfer a SEP to a ROTH in 2011 and add 50% of the taxable income to 2011 and 2012. A dice roll depending on your future earnings.

 

[LEAFfan]

I do not know the source of information by some posters that you get the $7,500 benefit if you lease. It is not what IRS told me or what appears in this article:
Christian Science Monitor
By Laurent Belsie / July 31, 2010

Those who lease won't benefit from the hefty $7,500 tax credit. But sometimes, when first confronting a brave new world of technological change, it's OK to hedge.

I never wanted to get involved in a dispute about who is rich. My purpose in the original post here was to see if there are any flaws in the idea of having somebody who qualifies for the $7,500 deduction buy a Leaf on my behalf. There may be good reasons for leasing but I do not see cost saving as one of them. Under the announced lease cost, you would have to buy the car for about $11k after three years to match purchasing with the $7,500 tax credit.

Nissan is taking the $7,500 if you lease and it reflects in the lease pricing. You don't do anything tax wise for that $7,500 if you lease.

MRSP for a SL is roughly $33,800. A lease on a $33,800 car would run you around $450/mo. But Nissan is 'taking' that $7,500 deduction so the price of the car is now effectively $26,300, and the lease on a car at THAT price point is something like $350.

The $7,500 is a tax credit for those that pay more than that in federal taxes each year. If you buy a Leaf, you have to work out your taxes and, if you pay more than $7,500 in federal taxes, you'll get that amount as a credit. (or, it'll come back to you in a check, if you don't change your withholding at all). If you LEASE, you 'get' the $7,500 automatically because Nissan gives you that in the form of a price break on the car. The monthly lease price is based on the value of the car, which Nissan is discounting $7,500.

Confused??? :mrgreen:

Actually, you're confusing the SV with the SL. The SL lease price is about $380 plus taxes, etc, so it will be over $400/mo.

 

[hodad66]

How "poor" do you have to be to not pay 7,500 in taxes?
I make 61K and pay 8500 in taxes. That is with a mortgage
deduction and some medical. Is not payroll deduction paying
taxes? Would it be great for Nissan or GM to charge less? You
bet. Without the 7500 off I wouldn't even be buying the car.
Actually leasing in my case.

 

[Desertstraw]

How "poor" do you have to be to not pay 7,500 in taxes?
I make 61K and pay 8500 in taxes. That is with a mortgage
deduction and some medical. Is not payroll deduction paying
taxes? Would it be great for Nissan or GM to charge less? You
bet. Without the 7500 off I wouldn't even be buying the car.
Actually leasing in my case.

Don't confuse taxes with income taxes, for purposes of the $7,500 credit only income taxes count. Only 16% of people pay $7,500 or more in income taxes. Are you implying 84% of Americans are poor?

 

[Gonewild]

How "poor" do you have to be to not pay 7,500 in taxes?
I make 61K and pay 8500 in taxes. That is with a mortgage
deduction and some medical. Is not payroll deduction paying
taxes? Would it be great for Nissan or GM to charge less? You
bet. Without the 7500 off I wouldn't even be buying the car.
Actually leasing in my case.

Don't confuse taxes with income taxes, for purposes of the $7,500 credit only income taxes count. Only 16% of people pay $7,500 or more in income taxes. Are you implying 84% of Americans are poor?

I make over $65,000 income and don't pay $7,500 closer to $6,000

 

[hodad66]

I am implying that we all pay income taxes through
our payroll deductions. If I got the 7500 credit then
I would get a sizable refund.

 

[hodad66]

I make over $65,000 income and don't pay $7,500 closer to $6,000

you have deductions for children?

 

[Jimmydreams]

How "poor" do you have to be to not pay 7,500 in taxes?
I make 61K and pay 8500 in taxes. That is with a mortgage
deduction and some medical. Is not payroll deduction paying
taxes? Would it be great for Nissan or GM to charge less? You
bet. Without the 7500 off I wouldn't even be buying the car.
Actually leasing in my case.

Don't confuse taxes with income taxes, for purposes of the $7,500 credit only income taxes count. Only 16% of people pay $7,500 or more in income taxes. Are you implying 84% of Americans are poor?

I make over $65,000 income and don't pay $7,500 closer to $6,000

And what some people are forgetting is that the $7500 is the MAX credit. If you pay $6000, then you get all $6000 back. True, it's $1500 less than someone who makes more than you, but that person is (year after year after year) PAYING more than you.

People need to quit looking at this like some gov't 'handout' because it's not. if it weren't for this program, someone would be paying $7500 in taxes. If someone is upset because they don't qualify for the $7500 total amount, then I want to hear them equally complain that they aren't paying their fair share every other year...and by implication should be offering to pay more.

Sheesh!

 

[evnow]

Here is a suggestion. Call your representatives and ask them to change the tax credit to a rebate.

That is what the new Senate bill does - though I don't know whether that has made it to the energy bill on the floor.

 

[mxp]

Actually, you're confusing the SV with the SL. The SL lease price is about $380 plus taxes, etc, so it will be over $400/mo.

Leaffan's comment is pretty accurate here. For Lease: by the time you order the car and reality sets in, this is a reasonably larger financial commitment.

1. $2,000 upfront payment
2. slightly over $400 (incl taxes etc) lease payment per month for 3 years.

In my opinion, even with the $7,500 fed assistance, I feel something is still wrong with the lease numbers. I mean, if you take a $45k Audi, Mercedes or BMW luxury car example, the monthly lease repayment comes out about the same. What's wrong with this picture? Is the "money factor" or the finance interest portion in the Leaf lease deal a bad deal? I don't have the details here with my comment so NO exact apples-apples comparison (lease term, money factor etc etc), just a swag at the marketing blurb I am seeing on the Audi, BMW, etc websites and the deals that are on currently.... so many 0.9% - 1.9% APR financing deals.

Therefore: $2000 down. Paying $400 per month for a Nissan vehicle. Okay, it's cool to be seen in an EV.... but without the $5,000 CA tax benefit, it's a tough choice in my case.

 

[Gonewild]

I make over $65,000 income and don't pay $7,500 closer to $6,000

you have deductions for children?

No children and that would not matter because as said before how much did you paying taxes.