Can someone explain the tax credit on the Chevy Volt?

[amdhunter]

I see there is a $7500 tax credit.

Does that mean, I don't have to pay $7500 worth of taxes next year? Or I'll get a refund of +7500 dollars?

In plain English? Saw one today close up and I am thinking about buying one (nah not really, but interested.) I don't think it's worth $40k and I don't quite understand how the tax credit will work.

Why can't the dealership just sell it for $34k?

 

[Aikouka]

The exact terms escape me at the moment, but if I remember correctly, there are two types of tax credits that you can get: one that counts toward a refund and one that doesn't. The prior is pretty much the same as your average deduction as it counts against what you owe and it can end up causing the government to owe you money. With the latter, once you hit 0 owed, the credit will no longer count. If I remember right, the best way to handle the latter is to ensure that you at least owe as much as the credit provides to get the full benefit.

Ultimately, I don't remember which one the EV credit is.

 

[Zenmervolt]

I'm pretty sure the tax credit is not refundable, so you'll get a maximum credit of $7,500 or the total amount of taxes you owe that year. So if your total tax debt after other exemptions, deductions, and credits is only $5,000, you'll only get a credit of $5,000. At least, that's my read from looking through the forms. And you won't get it until you file your 2013 taxes.

ZV

 

[KDKPSJ]

Tax credit goes against your tax due. In other word, it only limits up to what you will actually pay to IRS.

Tax rebate, on the other hand, is just like mail in rebate. You receive it through tax refund from the IRS, rather than by mail from manufacturer.

EV tax credit, IIRC, is tax credit. So, it should go against your tax due.


Here is example:

1) You made $ 65k and tax due is $ 6k. IRS withheld the tax for you for $ 8k.
- If you didn't buy Volt: you will receive $ 2k back ($ 8k minus $ 6k)
- If you bought Volt: you will receive $ 8k back. $ 7,500 tax credit will make your tax due to 0, so you owe nothing to IRS, and get all withholding back. Since your due was only $ 6k, $ 1.5k out of $ 7.5k is forfeited.

2) If you made $ 80k and tax due is $ 9k. IRS withheld the tax for you for $ 11k.
- If you didn't buy Volt: you will receive $ 2k back ($ 11k minus $ 9k)
- If you bought Volt: you will receive $ 9.5k back. $ 7,500 tax credit will make your tax due to $ 1.5k ($ 9k minus $ 7.5k), so you get $ 11k withheld minus $ 1.5k actual due. Since your due was over $ 7.5k, tax credit for EV is fully used.


Why dealer not just reduce the price by $ 7.5k? Because of it's tax credit as explained. Some people will utilize full $ 7.5k, some may not. It's basically taxpayer's business, not GM's or dealer's.

 

[amdhunter]

Tax credit goes against your tax due. In other word, it only limits up to what you will actually pay to IRS.

Tax rebate, on the other hand, is just like mail in rebate. You receive it through tax refund from the IRS, rather than by mail from manufacturer.

EV tax credit, IIRC, is tax credit. So, it should go against your tax due.


Here is example:

1) You made $ 65k and tax due is $ 6k. IRS withheld the tax for you for $ 8k.
- If you didn't buy Volt: you will receive $ 2k back ($ 8k minus $ 6k)
- If you bought Volt: you will receive $ 8k back. $ 7,500 tax credit will make your tax due to 0, so you owe nothing to IRS, and get all withholding back. Since your due was only $ 6k, $ 1.5k out of $ 7.5k is forfeited.

2) If you made $ 80k and tax due is $ 9k. IRS withheld the tax for you for $ 11k.
- If you didn't buy Volt: you will receive $ 2k back ($ 11k minus $ 9k)
- If you bought Volt: you will receive $ 9.5k back. $ 7,500 tax credit will make your tax due to $ 1.5k ($ 9k minus $ 7.5k), so you get $ 11k withheld minus $ 1.5k actual due. Since your due was over $ 7.5k, tax credit for EV is fully used.


Why dealer not just reduce the price by $ 7.5k? Because of it's tax credit as explained. Some people will utilize full $ 7.5k, some may not. It's basically taxpayer's business, not GM's or dealer's.

Yeah, I kinda get it. I'd rather just get a normal car with normal payment.

 

[LTC8K6]

Tax credit goes against your tax due. In other word, it only limits up to what you will actually pay to IRS.

Tax rebate, on the other hand, is just like mail in rebate. You receive it through tax refund from the IRS, rather than by mail from manufacturer.

EV tax credit, IIRC, is tax credit. So, it should go against your tax due.


Here is example:

1) You made $ 65k and tax due is $ 6k. IRS withheld the tax for you for $ 8k.
- If you didn't buy Volt: you will receive $ 2k back ($ 8k minus $ 6k)
- If you bought Volt: you will receive $ 8k back. $ 7,500 tax credit will make your tax due to 0, so you owe nothing to IRS, and get all withholding back. Since your due was only $ 6k, $ 1.5k out of $ 7.5k is forfeited.

2) If you made $ 80k and tax due is $ 9k. IRS withheld the tax for you for $ 11k.
- If you didn't buy Volt: you will receive $ 2k back ($ 11k minus $ 9k)
- If you bought Volt: you will receive $ 9.5k back. $ 7,500 tax credit will make your tax due to $ 1.5k ($ 9k minus $ 7.5k), so you get $ 11k withheld minus $ 1.5k actual due. Since your due was over $ 7.5k, tax credit for EV is fully used.


Why dealer not just reduce the price by $ 7.5k? Because of it's tax credit as explained. Some people will utilize full $ 7.5k, some may not. It's basically taxpayer's business, not GM's or dealer's.

IIRC, if the vehicle is leased, the leasing company can claim the credit. Thus the popularity of leases.

 

[KDKPSJ]

IIRC, if the vehicle is leased, the leasing company can claim the credit. Thus the popularity of leases.

I left out the lease option, only considered purchasing and its tax effect. But yeah, according to IRS, the leasing company takes an advantage of tax credit, and then if that's the case, the lessee should consider that as a part of leasing contract.

 

[LTC8K6]

I left out the lease option, only considered purchasing and its tax effect. But yeah, according to IRS, the leasing company takes an advantage of tax credit, and then if that's the case, the lessee should consider that as a part of leasing contract.

That tax credit is why dealers sell Volts to each other and then sell the "used" Volts.