American Tax Service

Helping Americans File Their Taxes

Sep
22

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Tax Credits for Electric Cars

Category: Credits Tags: , , , , , , , ,

Electric vehicle tax credits can be highly valuable, but there are a lot of confusing rules regarding how they work. This guide will show you what you need to know about tax credits on plug-in electric vehicles. It will also answer some of the most common questions people have.

What Are the Electric Vehicle Tax Credits?

electric car and vehicle tax credit

The Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), which is now known as the Clean Vehicle Credit, was amended by the Inflation Reduction Act of 2022 (Public Law 117-169), and a new requirement for final assembly in North America was added as a result of this legislation.

This requirement went into effect on August 17, 2022.

Section 30D of the Internal Revenue Code offers a credit for Qualified Plug-in Electric Drive Motor Vehicles, such as passenger cars and light trucks.

The credit for automobiles obtained after 12/31/2009 is $2,500 + $417 plus an extra $417 for each kilowatt hour of battery capacity above 5 kilowatt hours. The maximum amount of credit available for a vehicle is $7,500.

When at least 200,000 eligible vehicles created by a manufacturer and sold for use in the United States, the credit begins to phase out for that company’s vehicles.

How Much are Electric Vehicle Tax Credits?

All-electric and plug-in hybrid vehicles bought new in or after 2010 may be eligible for a $7,500 federal income tax credit.

The amount of the credit will vary depending on the capacity of the battery used to power the car. State and municipal tax breaks may also be available.

If you purchased a Nissan Leaf and your tax bill was $5,000, that’s all you get at the end of the year. You’re not going to get the other $2,500 as part of a refund. Furthermore, if part of the credit is unused, you can’t carry it over to the following year.

This credit only applies to purchases of a vehicle. If you happen to lease the vehicle, the manufacturer gets to take advantage of the tax credit instead. Some manufacturers will lower your monthly payment to take the credit into account, but they’re not obligated to do this.

The size of the battery in the car is one of the most essential criteria in determining how beneficial it is to claim the electric car credit. For example, the Toyota Prius Prime has a smaller battery, and it’s a hybrid, so you can only get a maximum of $4,502 from purchasing this vehicle.

How Much is the Electric Vehicle Tax Credit for a 2021 Tesla?

The Clean Energy Act for America would benefit Tesla by allowing most Tesla vehicles to qualify for an $8,000 (House version) or $10,000 (Senate version) refundable EV, electric vehicle tax credit while discouraging Chinese EVs from entering the US market.

Tesla, on the other hand, does not utilize unionized workers. Therefore it would be ineligible for the extra $2,500 (Senate version) or $4,500 (House version) credit that corporations like Ford and GM would get.

To help you understand how much each vehicle is worth, look at the chart below:

What Vehicles Currently Qualify for the Federal Credit?

Here are some popular models:

Electric Vehicles Federal Tax Credit
BMW i3 $7,500
Chevrolet Bolt $7,500 (1/1/19-3/31/19) ($3,750, 4/1/19-9/30/19. $1,875, 10/1/19-3/31/20)
Fiat 500e $7,500
Ford Focus Electric $7,500
Hyundai Ioniq Electric $7,500
Kia Soul EV $7,500
Mercedes-Benz B-Class EV $7,500
Nissan Leaf $7,500
Tesla Model 3 $3,750 (1/1/19-6/30/19) ($1,875, 7/1/19-12/31/19)
Tesla Model S $3,750 (1/1/19-6/30/19) ($1,875, 7/1/19-12/31/19)
Tesla Model X $3,750 (1/1/19-6/30/19) ($1,875, 7/1/19-12/31/19)
Volkswagen e-Golf $7,500
Plug-In Hybrids Federal Tax Credit
Audi A3 e-tron $4,205
BMW i3 with range extender $7,500
BMW i8 $3,793
Chevrolet Volt $7,500 (1/1/19-3/31/19) ($3,750, 4/1/19-9/30/19. $1,875, 10/1/19-3/31/20)
Chrysler Pacifica $7,500
Ford C-Max Energi $4,007
Ford Fusion Energi $4,007
Honda Clarity Plug-In Hybrid $7,500
Hyundai Ioniq Plug-In Hybrid $4,543
Hyundai Sonata Plug-In Hybrid $4,919
Kia Optima Plug-In $4,919
Mini Countryman S E All4 $4,001
Toyota Prius Prime $4,502
Volvo XC90 T8 $4,585

The US Department of Energy maintains the entire list. You can sort by vehicle type or manufacturer.

Are There Any Terms and Conditions Associated With the EV Tax Credit?

There are additional rules involving EV tax credits. As well as the rule on how much you can get back from the Federal government, there are a few other things you must take into account:

  • The tax credit is awarded to the registered owner of the vehicle, which is why if you’re leasing, you can’t claim the credit. Instead, try to find a manufacturer that will factor the credit into your monthly repayments.
  • You can’t claim the credit if you’re buying an electric vehicle to resell it. However, this is almost impossible to prove, so plenty of people have claimed the credit anyway.
  • The vehicle’s primary purpose must be for driving within the US. In other words, if you live in Mexico, you can’t just buy in the US and immediately take it to Mexico, at least not for the first year.
  • Only cars built by qualified manufacturers are eligible for full credit.
  • Battery electric vehicles and plug-in hybrids must have battery packs that possess at least 4 kWh of energy storage. They must also be capable of being recharged from an external power outlet.
  • Manufacturers don’t have to certify their vehicles to the IRS that they meet the credit requirements. You can generally rely on manufacturers and their word as to whether a car is eligible. This also applies to electric motorcycles, three-wheel EVs, and other similar vehicles.
  • Please take note that the IRS is well within its rights to reject a request for a tax credit.
  • The car must have a qualified plug-in electric drive motor.

Do the Electric Car Tax Credits Expire?

The government has already begun to phase out electric vehicle tax credits. This is because sales volume is increasing, and they were introduced to encourage this industry.

There’s no set date for when electric vehicle tax credits are due to expire. It depends on the manufacturer. This arises when a manufacturer sells 200,000 qualifying vehicles. Tesla was the first manufacturer to reach this limit back in July 2018.

That’s why from January 1st to June 30th, 2019, the tax credit has decreased by $3,750. From July 1st until the end of the year, the credit is only worth $1,875. From 2020, you won’t be able to claim tax credits on a Tesla.

General Motors became the second manufacturer to hit this milestone in the final financial quarter of 2018. From April 2019, qualifying vehicles are only worth $3,750 in tax credits. Then, from October 2019 to March 2020, the credit drops to $1,875. After that, the credit phases out completely.

Nissan is expected to be the third manufacturer to hit the limit, but as of this writing, it’s still 70,000 sales away from this. However, analysts expect sales to pick up soon.

Can You Refuse to Take Electric Vehicle Tax Credits?

This is a common question from people who want to pass the credit to someone else, such as if the car is used as a loan or test car.

The answer is you can’t pass electric vehicle tax credits to others. Even if the original owner didn’t claim the credit, the new owner can’t claim the credit.

This is especially important to know about if you plan on buying a used car. You may find that purchasing a new model is worth the additional cost because you’ll get more back from the tax credit.

Are There Any Expired Programs?

Hybrids and clean-diesel cars used to qualify for tax credits, but these were discontinued in December 2010. In addition, models like the Toyota Prius and the Hyundai Sonata Hybrid don’t have batteries that can be charged from an external source, so they’re no longer relevant for electric vehicle incentives.

Are There Any State Programs I Can Take Advantage Of?

Do remember that the Federal government is not the only body you can claim a tax credit from. There are dozens of programs run by states and even regions that can offer tax credits on electric cars and other vehicles that take advantage of alternative fuels.

Many states have multiple programs, but the problem is most of them apply only to businesses. A lot of credits are in the form of exemptions, such as inspections and fees. Some programs even offer access to carpool lanes and regional free or reduced parking.

Retail buyers do have some options, though. They can claim rebates, tax credits, and reductions on vehicle taxes by purchasing a qualifying vehicle.

California is one such state that does this. If you buy or lease a new car, like the Chevrolet Bolt or the Jaguar I-Pace, you can receive a rebate of $2,500. These programs are in addition to the Federal tax credit. So, Californians can shave off up to $10,000 off the cost of a new model.

On the other hand, Plug-in hybrids work a little differently because their batteries are smaller, and they burn some form of petroleum-based fuel most of the time. Cars like the Chevrolet Volt are only eligible for $1,500 rebates in California.

It would help if you looked up Plugin America for more information. They provide a map of the country and all the different plug-in car rebates, credits, and deductions. The Department of Energy also offers a similar resource.

Before you shop, look up what you may be entitled to. Unfortunately, many states have either ended or will soon end their programs. For example, Georgia ended its rebate program back in July 2015.

What about Fuel Cell Cars?

If you purchased a fuel cell car after January 1st, 2017, you’re no longer able to claim Federal tax credits on these cars. Those who bought before were able to get a Federal tax credit of $4,000, in addition to credits ranging from $1,000 to $4,000. After that, it largely depended on the fuel efficiency rating of the vehicle.

Some states still have these programs. For example, California continues to offer a $5,000 rebate on the Toyota Mirai.

How to Claim the Electric Car Tax Credit

Online tax software asks you simple questions to fill in the proper forms and helps you claim every electric car tax credit and deduction that you qualify for, and you will get the largest refund possible.

You never have to know the tax laws or rules during the filing process!

Sep
20

By

Home Energy Tax Credits

Category: Credits Tags: , , , , , , , ,

Tax season is going to be here before you know it. Therefore, now is the time to ensure that you have completed all of the energy-efficient upgrades to your home.

Having an energy-efficient home will save money on your bills and pay less money in taxes. Learn how you claim home energy tax credits if you qualify.

Non-Business Energy Property Credit

home energy tax creditsYou can get a 30% credit for your energy-efficient improvements. Things that fall under this category include:

  • Water heaters
  • Electric heat pumps
  • Central air conditioners
  • Natural gas, propane, or oil water heaters
  • Qualified oil furnaces
  • Qualified oil hot water boilers
  • Some air circulating fans
  • Insulation that reduced heat loss or gains
  • Exterior windows, skylights, or doors
  • Storm windows and doors
  • Solar panels
  • Metal and asphalt roofs that reduce heat loss or gain

Residential Energy Efficient Property Credit

This energy tax credit will allow you to have a 30% credit for the alternative energy equipment that you have installed. Some of the things included are as follows:

  • Solar electric property
  • Solar water heating property
  • Fuel cell property
  • Small wind energy property
  • Geothermal heat pump property

Most of the items here do not have a limit. However, the fuel cell property credit is limited to $500 for each one-half kilowatt of capacity of the property.

How to Claim the Energy Tax Credit

Make sure that you take advantage of these two credits if you are eligible. Your home does not have to be your main residence; it only has to be in the US. To apply for the Residential Energy Property Credit, complete Form 5695 and attach it to your Form 1040.

To ensure that you claim all the energy tax credits that you are eligible for, we recommend filing your taxes online this year.

How to File Taxes Online Using TurboTax

When you file with TurboTax Online Online they will search over 350 tax deductions and credits to find every tax break you qualify for so you get your maximum refund.

Aug
31

By

How to Determine Which Medical Expenses are Tax Deductible

Category: Deductions Tags: , , , , , , , , , ,

Even if you have the best insurance plan, you still might end up paying medical bills. However, all hope is not lost. You can still get a tax break from your medical expenses that can help reduce your overall medical costs.

Learn what medical expenses are tax deductible.

In 2019, the IRS allowed you to deduct medical expenses that exceeded 7.5% of your adjusted gross income.

Beginning Jan. 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.

The “Medical” Expenses You Can Deduct

The term medical is used broadly, but it does include dental and vision expenses. So whether you’ve gotten contact lenses, glasses, veneers, braces, or root canals this year, you can claim the medical expenses tax deduction.

It doesn’t just stop there, though. Other medical deductions can include medical devices, psychiatric treatment, psychological treatment, preventative care, prescriptions medicines, and even surgeries, all fall under the scope of “medical deductions” for your taxes.

Even those travels to and from the doctor’s office and monthly insurance payments are considered deductibles.

Medical Expenses That You Can’t Deduct

Before you claim every procedure as a deductible on your taxes, you need to know what is not allowed as an IRS medical deduction this year.

If you’ve been reimbursed for the procedure by either an employer or insurance agent, you are unable to deduct the expense from your taxes. This does not include medical pre-payment plans, though. So, you’re going to be covered if you had help from a credit provider for the procedure.

Cosmetic surgeries cannot be claimed either unless they were a “life-saving procedure” or contributed to a fix to a serious health issue you were facing. For most cosmetic surgeries, you won’t be covered for medical deductions. You also cannot claim everyday health and hygiene products or over-the-counter pharmaceuticals.

Is Medical Insurance Tax Deductible?

Any out-of-pocket health insurance premiums you pay for plans that include medical care are tax deductible. (Medical insurance coverage, with certain exceptions, cover treatment such as hospitalization, surgery, and X-rays; prescription medications, insulin, dental care, lost or broken contact lenses, and long-term care.)

You can write off these costs for you, your spouse, and your dependents when filing your taxes.

Is There a Tax Deduction for Medical Mileage?

Yes, If the transportation costs are primarily for and necessary to the medical care, you may be able to claim mileage reimbursement from the IRS.

You can choose between the following two approaches when subtracting mileage for medical care:

  • Standard personal car mileage is $0.16 per mile.
  • Actual costs you’ve incurred for using the car to transport patients

Itemization or Standardization?

While it would be a dream to claim both, you aren’t able to claim both an itemized tax deduction with your standard deduction. Essentially, your medical deduction needs to be significant, along with other itemizations, to give you a great deduction.

If you’re not sure which is better, you don’t have to worry. Online tax calculators offer you a simple solution by processing all the data and picking the one that gives you the best tax refund.

Are Pet Medical Expenses Tax Deductible?

Unfortunately, you cannot claim medical expenses for dogs as a deduction on your tax return. Only if your pet is a recognized service animal, such as a guide dog, would there be an exception.

If your pets are recognized service animals, you may be able to deduct the costs of their medical care if you have a physical handicap, hearing loss, or vision impairment. Purchase, training, and upkeep costs for the animal, including food, grooming, and medical care, may be paid.

The IRS does not classify therapy animals as trained service animals. Visit Publication 502: Medical and Dental Expenses for further details on the deduction of medical costs for pets (service animals).

If you do have a licensed service animal, you can list the expenses for keeping the animal in good health on Schedule A under medical expenses.

Make Sure to Pay Your Medical Expenses

Although paying your medical expenses isn’t fun, it’s the only way you can deduct them from your income.

When it comes down to it, Uncle Sam believes you are only owed a deduction if you’ve paid up on the current bill. You cannot ask for deductions on future expenses, so you want to be current on the bill. Even if you pay it on a credit card, it is “paid” by you.

So, if you’ve been plagued by medical issues this year, consider an itemized deduction for this tax season.

How to Claim the Medical Expenses Deduction

To claim the medical expenses deduction, you have to itemize your deductions. Additionally, you should only claim this deduction if it is higher than the standard deduction. If you decide to itemize your deductions, you have to file Form 1040 and attach Schedule A.

Aug
28

By

What is a W-2 Form?

Category: Forms Tags: , , , , , , , ,

w2 form 2019 2020The W-2 Form is one of the most essential forms in the tax world. It details what you’ve been paid by your employer.

The first point is to remember that the W-2 form is entirely different from your W-4 form. This details any payment that has been withheld as tax by your employer. Any employer that has paid you at least $600 during the tax year must send you a W-2.

Contractors and freelancers will receive 1099s because they don’t have employers; they have clients.

You’ll need the W-2 form for everything from filing your taxes to claiming tax credits.

You Can’t Do Your Taxes Without Your W-2

Before you can complete your taxes, you must have your W-2 form. It’s the record of how much you’ve earned in the last financial year and how much tax you’ve already paid.

Without your W-2, you don’t have the information you need.

You Must Get Your W-2 By the End of January

By law, employers must make sure that their employers have access to their W-2 forms by January 31st, or they can face harsh financial penalties. The definition, set by the IRS, is that employers must have a W-2 form in their hands by the beginning of February.

But these days, it’s easier than ever before to get your W2 form online, because employers can send these forms electronically. Just make sure to keep in mind that previous employers can still wait until the end of January to provide you with your W-2 form.

However, if you do ask for it earlier, your employer must, by law, provide it to you within 30 days.

Your W-2 is So Much More than Your Salary

It’s easy to think that your W-2 form is exclusively about how much you earned in the last year. But it also includes lots of other helpful information.

You’ll also find numbers on how much you contributed to your retirement fund, how much your employer contributed to your health plan, and any dependent care benefits you received. All this data will influence exactly how much tax you’re expected to pay in the next year.

Your W-2 is Also Possessed by State and Local Tax Authorities

The W-2 Form is not something that only you and your employer possess. Your employer is legally obligated to send it to both the state and local tax authorities, as well as sending Copy A to the Social Security Administration.

This is designed for the purpose of making sure that taxpayers enter all the correct information on their tax forms. Both your state tax authority and the IRS will check the numbers provided against the copies they have access to.

Don’t Believe What You See

Employers can and do make mistakes when they send out W-2 forms. It can be as simple as getting the wrong address or as significant as putting a decimal point in the wrong place.

If there’s something clearly wrong, you should point this out and request a correction of your W-2 form. If it means that your taxes are late, you won’t get fined by the IRS because it wasn’t your fault.

Your employer, on the other hand, may receive a fine if their error causes your taxes to be late. They can also be fined if there are significant mistakes.

The Most Important Part of Your W-2 is the Address

You might not think that the address stated on your W-2 could become an issue. But it happens to thousands of Americans every year. If you haven’t gotten your W-2 by Valentine’s Day, you need to investigate whether the wrong address was used.

You should call the IRS at 1-800-829-1040 to rectify this. You’ll need to provide some basic information about what you were paid and where you worked.

In this case, you may be able to estimate withholdings and earnings on your tax return. However, when your W-2 shows up, you may need to file your taxes all over again.

Learn how you can get your W2 form online fast with the online W2 finder.

Aug
28

By

New Tax Credits and Deductions

Category: Credits, Deductions Tags: , , , , , , , ,

Do you want to reduce your tax bill this year? You can maximize your tax savings by checking to see if you’re eligible to claim any of the new expanded tax credits.

The difference between a tax credit and a deduction is a deduction reduces your taxable income, whereas credits reduce the amount of tax you pay directly. Refundable credits are even better because they can reduce your tax bill even if the credit is worth more than you owe. Non-refundable credits are only valid up to the amount you owe.

We’re going to look at how much seven of the big tax credits are worth.

How Much is The Earned Income Tax Credit (EITC)?

For the tax year, the credit can range from $538 for no qualifying children to $6,660 for three or more children that qualify. The EITC is the number one credit you should aim for if you’re a low-income family. It’s a refundable tax credit you can claim if you qualify.

How much is the earned income credit?

The requirements are you need to be a US citizen or resident alien with an earned income, a valid social security number, and an investment income of under $3,650 for the current tax year. It can’t be claimed if you’re married and filing separately.

When you file, the EITC income limit for taxpayers with no qualifying children is $15,820 for single taxpayers and $21,710 for married couples filing jointly.

If you have qualifying children, the EITC scales up to a maximum of $50,594 and $56,844 for singles and couples with three qualifying children, respectively.

How Much is the Child Tax Credit?

The child tax credit is a non-refundable tax credit providing up to $2,000 per child this tax season. The Tax Cuts and Jobs Act (TCJA) increased the credit up to $2,000 until 2025 to offset the removal of many personal exemptions. These changes will become apparent in the taxes you file your tax return.

how much do i get back in taxes for a child?

Income phaseouts have also been increased until 2025. Your modified adjusted gross income where the phaseout begins is $200,000 for single taxpayers and $400,000 for married couples filing jointly. It represents an increase of $75,000 and $110,000, respectively.

There are seven different criteria a child must meet, including age, amount of support, relationship, claimed dependency, citizenship, how much time the child spends in your home, and your overall family income.

What if your tax bill isn’t high enough to claim the full credit?

You could qualify for the Additional Child Tax Credit, which is a refundable tax credit. This enables taxpayers to claim the difference of $1,000 this year and $1,400 from April 2019. Form 8812 will enable you to see if you qualify.

How Much is The Non-Child Dependent Credit?

This is a new non-refundable tax credit worth $500 to cover any dependents who don’t qualify under the child tax credit. For example, this could be a child who’s 17 or older or any dependents like elderly parents. This credit can’t be claimed for yourself or your spouse when filing jointly.

This credit can be claimed when you file your taxes until the 2025 tax year.

How Much is The Child and Dependent Care Tax Credit?

You can claim a maximum of $3,000 in care expenses for a single qualifying dependent or $6,000 for two or more. It covers from 20% to 35% of any allowable care expenses. It’s based on income with no phaseout.

This tax credit is relevant if you pay care costs relating to any dependents in your household, including children and the elderly. It’s designed to offset any costs incurred because you must work or to help you find work.

How Much Are Education Tax Credits?

The Lifetime Learning Credit can be used to cover $2,000 per year if your modified adjusted gross income is below $65,000 as a single taxpayer or $130,000 if you’re a married couple filing jointly.

college tax credits

Another education credit is the American Opportunity Tax Credit (AOTC), where you can claim a maximum of $2,900 for each eligible student every year for four years, but your modified adjusted gross income must be below $90,000 as a single taxpayer or $180,000 for married couples filing jointly.

40% of the AOTC is classified as refundable.

However, you can only claim one of two tax credits per student.

The deduction for education tuition and fees was removed as part of the TCJA. However, tax credits can offer you an alternative way to make savings from your education.

How Much is The Savers Credit – Retirement Savings Contribution Credits?

This may also be known as the Saver’s Credit. This tax credit offers a tax reduction of up to 50% of your contributions to an IRA or any other retirement plan provided by your employer, such as your 401(k).

The credit is available if you have an adjusted gross income of $18,500 or less for a single taxpayer or $37,000 for a married couple filing jointly for the coming tax year.

It does phaseout. It can fall to 20% and 10% of your overall contributions before it phases out completely if you earn $31,000 as a single taxpayer or $62,000 as a married couple filing jointly.

How Much is The Healthcare Premium Tax Credit (PTC)?

The PTC tax credit is available if your household income is below 400% of the Federal poverty line, based on the size of your family. For the taxes filed in April 2018, this limit is $11,880 for individuals and $4,140 per additional family member in your household.

Obamacare hasn’t been completely killed off by the current administration. The penalty for not having health insurance won’t be removed until 2019. The PTC continues to exist for people who want to purchase health insurance through the general marketplace.

Although some of the new tax law changes may seem to be insignificant, you could save a substantial amount on your next tax return by applying these updated rules and regulations accordingly. Keep in mind that these types of changes tend to happen on an annual basis, so make sure you stay on top of amendments to maximize your benefits.

How to Claim Tax Deductions and Credits

Don’t worry about knowing these new tax credits and deductions and how to claim them, Online tax filing asks simple questions about you and helps you easily claim every tax credit and deduction possible.

The online program finds all the new tax deductions and credits you are entitled to for the largest possible refund. It’s the most complete free tax filing solution for everyone.

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