Desertstraw
Posts: 250
Joined: Sat Jul 31, 2010 5:23 am

Tax credit

Sat Jul 31, 2010 5:31 am

Although Nissan advertises "up to $7,500 credit" for purchasers of the Leaf, most buyers will not get it because they do not pay enough income tax. Here is a simple idea and I welcome criticisms of it. What if you have a person in a high income tax bracket purchase the Leaf and then immediately resell it to you? If the person is not a relative or close friend, you could pay him $500 for the help and both will come out ahead. Will this affect the warranty or reservation for early buyers? It seems grossly unfair that under the tax code, rich people can buy the Leaf for less than the rest of us.

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mwalsh
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Re: Tax credit

Sat Jul 31, 2010 5:57 am

Most buyers? Rich people? You only need to be into a low six figure household income with a few tax deductions (kids and mortgage interest) to have a tax liability equal to the Leaf tax credit. Less if you're single, childless, and rent! Now I do realize that not everyone makes six figures between two partners, but I hardly doubt it's that unusual or makes those who do (feel) rich!

That said, I don't see anything in the tax code that would disallow someone from buying the car new, taking the tax credit, and flipping it. Altruistically selling it to you cheaper, or even at a nice profit to someone so desperate to get one now rather than later that they don't care about the tax credit!
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Desertstraw
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Re: Tax credit

Sat Jul 31, 2010 6:29 am

In 2005 before the crash:
$100,000 or more (15.73%) 2 3
$100,000 to $149,999 11,194 9.89%
$150,000 to $199,999 3,595 3.17%
$200,000 to $249,999 1,325 1.17%
$250,000 and above 1,699 1.50%

A lot of people buy cars who are not in the upper 15.73%.

Is a gift from the government geared to the top group fair? "Rich" is in the eye of the beholder. From the census: Median household income, 2008 $52,029

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Randy
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Re: Tax credit

Sat Jul 31, 2010 7:22 am

My first response is that if the tax credit is a concern, then that person would be smart to take advantage of a Leaf lease, since the federal tax credit will be included in the Lease price (courtesy of Nissan).

But digging deeper into the issue of a Leaf purchase...

I was interested in finding the amount of federal tax that people actually pay, so here is what I found on the taxfoundation.org website...

http://www.taxfoundation.org/news/show/250.html

Table 8:

Year 2007: Total avg tax rate 12.68%

In average terms, that means an average household with an income of $59,148 would have a tax liability of $7,500. Granted, using averages sometimes can be misleading, so look at the last two columns in the table. The top 50% of taxpayers pay an average of 14.03%, and the bottom 50% pay 2.99%.

At least the top 50% of taxpayers (and probably more) at or around the 14.03% rate should be able to get back a decent amount of the tax credit, if not all.

As far as the bottom 50%, they certainly pay less taxes. But the honest question that I have to ask, with no disrespect intended, is whether a person or family that has a lower income at the bottom of the tax tables would be able to afford a new car in the price range of the Leaf, tax credit or no tax credit?

A $32K purchase with tax and license is probably closer to $37K out the door. So even with the possibility of a tax credit or state rebate, is still a very sizable purchase for a family that makes $35K or $45K or $55K at the lower tax rates.

If the tax credit is an issue with income / tax rates, the Lease deal is the way to go.

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mwalsh
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Location: Garden Grove, CA

Re: Tax credit

Sat Jul 31, 2010 7:39 am

Randy wrote:In average terms, that means an average household with a taxable income of $59,148 would have a tax liability of $7,500.
Excellent post Randy! The only modification I'd probably make is the insertion of the word taxable. By the time I'm done with pre-tax 401k contributions; paying the mortgage; property taxes; cash donations to church and the couple of charities we support; the assistance my wife makes with raising her one daughter's children (don't ask!); and the small number of State taxes that are deductible (car registrations), our taxable income is quite a ways off our gross.

I do feel blessed compared to some, but not rich by ANY stretch of the imagination. In fact, this is the very first time in my almost 50 years I've even considered buying a new car, and I've not bought a used car previously for more than $10,000. Actually, having never had a car payment before, I'm somewhat stressing over the idea of a $600 one (100% financing @ 2.99% for 60 months), even with the tax breaks and CA incentives to help with it for the first couple of years! :o
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2015 pack on 12/30/15
Tinted windows
Bosch AGM 12v
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2013 sun visors
LED shifter
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GT-R map lamp lenses
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evnow
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Re: Tax credit

Sat Jul 31, 2010 8:14 am

mwalsh wrote:
Randy wrote:In average terms, that means an average household with a taxable income of $59,148 would have a tax liability of $7,500.
Excellent post Randy! The only modification I'd probably make is the insertion of the word taxable.
Not correct. They are actually talking about AGI (adjusted gross income, line 37 in 1040) - not taxable income which comes later after deducting exemptions etc.
1st Leaf : 2/28/2011 to 5/6/2013
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Desertstraw
Posts: 250
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Re: Tax credit

Sat Jul 31, 2010 8:18 am

The lease deal may not be what people think that it is. I called IRS and spoke to their specialist. She said that the $7,500 is for individual taxpayers. As the lease deal was explained to me by somebody on the Nissan line, the dealer who leases the car to you takes the $7,500 credit and then sells the car to you for a lower price at the end of the lease period. At least from what I have been told, this may not be true.

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mwalsh
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Location: Garden Grove, CA

Re: Tax credit

Sat Jul 31, 2010 8:33 am

Desertstraw wrote:The lease deal may not be what people think that it is. I called IRS and spoke to their specialist. She said that the $7,500 is for individual taxpayers. As the lease deal was explained to me by somebody on the Nissan line, the dealer who leases the car to you takes the $7,500 credit and then sells the car to you for a lower price at the end of the lease period. At least from what I have been told, this may not be true.

The tax credit is taken by Nissan at the corporate level and factored into what you're paying for the car.
2011 Blue Ocean SL with 87,000 miles
2015 pack on 12/30/15
Tinted windows
Bosch AGM 12v
Ecopia 422+ tires
L1 EVSE upgrade
FIAMM horns
Superbright LED lighting
2013 sun visors
LED shifter
Heated seats
GT-R map lamp lenses
Altima illuminated door switches

Carlos
Posts: 201
Joined: Thu Jun 03, 2010 10:50 am
Delivery Date: 31 Mar 2011
Leaf Number: 0872
Location: Phoenix, AZ

Re: Tax credit

Sat Jul 31, 2010 8:53 am

mwalsh wrote:
Desertstraw wrote:The lease deal may not be what people think that it is. I called IRS and spoke to their specialist. She said that the $7,500 is for individual taxpayers. As the lease deal was explained to me by somebody on the Nissan line, the dealer who leases the car to you takes the $7,500 credit and then sells the car to you for a lower price at the end of the lease period. At least from what I have been told, this may not be true.

The tax credit is taken by Nissan at the corporate level and factored into what you're paying for the car.
I would agree with this explanation.

I lease my rooftop solar facility with a purchase option after 6 years to the end of term. The Federal, State as well as the Power Company rebates were signed over to the Solar Company for a reduced monthly lease payment.

Very simple formula and easily fits into my monthly budget.
Warranty Battery Replacement 09/16/2013. 31055 miles

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LEAFer
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Leaf Number: 000215
Location: Sacramento Area

Re: Tax credit

Sat Jul 31, 2010 9:16 am

Desertstraw wrote:The lease deal may not be what people think that it is. I called IRS and spoke to their specialist. She said that the $7,500 is for individual taxpayers. As the lease deal was explained to me by somebody on the Nissan line, the dealer who leases the car to you takes the $7,500 credit and then sells the car to you for a lower price at the end of the lease period. At least from what I have been told, this may not be true.
And to add to what mwalsh just said: Some advantages of the lease deal are 1] you don't have to wait until you file your individual federal income tax return (possibly up to 21 months later (October) after buying the car in January)), because you get the FULL $7,500 benefit NOW (in the form of a lower "aqcuisition" (not purchase, since it's a lease) price); 2] you don't have to guess now whether your income tax liability will exceed $7,500 so that you can take full advantage of the credit. (Other lease versus purchase pros and cons still apply and are a personal choice. And there's a withholding trick to shorten the 21months time frame.)
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