4xe cheaper than JLUR 2.0T ! ($7500 Rebate Explained)

[FloridaLarry]

I think to get the $7500 tax refund you have to itemize. I could be wrong though. I got this off of car and driver. If you owe at the end of the year the $7500 will be deducted from that you won’t get excess in the form of a check.

....and if you received more in credits than you owe in taxes, you will not receive the difference in the form of a check.

We need to be clear here..
Of course you have to pay the full $60K for the 4xe when you buy it this year and there is no mention of it on the paperwork. But next April you get $7500 back, either in the form of a reduced amount you owe the IRS, or the IRS will add it what they owe you. Either way, you get $7500 you wouldn't get if bought some other vehicle. Therefore you must consider the savings in any deal for a 4xe (unless you lease, or don't end up paying income taxes in 2021).

Speaking of leasing, it seems Jeep credit or whoever the leasing company is, gets the $7500 credit against their taxes owed. Nice.

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[Monster1926]

We need to be clear here..
Of course you have to pay the full $60K for the 4xe when you buy it this year and there is no mention of it on the paperwork. But next April you get $7500 back, either in the form of a reduced amount you owe the IRS, or the IRS will add it what they owe you. Either way, you get $7500 you wouldn't get if bought some other vehicle. Therefore you must consider the savings in any deal for a 4xe (unless you lease, or don't end up paying income taxes in 2021).

Speaking of leasing, it seems Jeep credit or whoever the leasing company is, gets the $7500 credit against their taxes owed. Nice.

I thought that’s how I explained it sorry. I started off unsure until I read how it works. I edited my first post to reflect it. The IRS will not add it to what they owe you, it’s a non refundable credit.

 

[JDub11]

The irs will absolutely add it to your refund check if you pay over 7500 in taxes. That is over the entire year not what you might owe at the end of the year.

 

[Echo4papa]

I thought that’s how I explained it sorry. I started off unsure until I read how it works. I edited my first post to reflect it. The IRS will not add it to what they owe you, it’s a non refundable credit.

I think he means in the overall sense of adding it into your refund.

To be clear, the $7500 tax credit is not dependent on your refund or what you owe, it's dependent on total tax liability based on what you made and other normal tax factors, independent of what you've paid in during the year.

Your refund (or what you owe) annually is basically the difference between what you paid all year, and what you owe (your tax liability).

Your tax liability has to be equal to or greater than $7500 in order to qualify for the full tax credit.

You may only get a refund each year of $500 (or owe some amount), but that doesn't matter. Only your tax liability. If your tax liability is 10k, but you paid in 9.5k, you'd get a refund of $500, plus the tax credit, for a total of $8,000 (with the credit adding into what they owe you).

At least that's how I understood his comment. Not that your tax liability was negative and the credit would add to that.

 

[FloridaLarry]

Correct. Its a reduction in your liability for the 2021 tax year (if you have a liability, that is)

Bottom line; its something to consider when calculating a 4Xe deal.

 

[Monster1926]

I think he means in the overall sense of adding it into your refund.

To be clear, the $7500 tax credit is not dependent on your refund or what you owe, it's dependent on total tax liability based on what you made and other normal tax factors, independent of what you've paid in during the year.

Your refund (or what you owe) annually is basically the difference between what you paid all year, and what you owe (your tax liability).

Your tax liability has to be equal to or greater than $7500 in order to qualify for the full tax credit.

You may only get a refund each year of $500 (or owe some amount), but that doesn't matter. Only your tax liability. If your tax liability is 10k, but you paid in 9.5k, you'd get a refund of $500, plus the tax credit, for a total of $8,000 (with the credit adding into what they owe you).

At least that's how I understood his comment. Not that your tax liability was negative and the credit would add to that.

I’m over it, I read about it a little while back and it seems like everything the government puts out it’s open to interpretation. It could go up down left right depends on who’s reading it. I hope it works out the way OP is thinking. Im going the opposite way and ordered a 392.

 

[hoag4147]

I’m over it, I read about it a little while back and it seems like everything the government puts out it’s open to interpretation. It could go up down left right depends on who’s reading it. I hope it works out the way OP is thinking. Im going the opposite way and ordered a 392.

Lol. They’re adding 7500 to yours. Well worth it

 

[Monster1926]

Lol. They’re adding 7500 to yours. Well worth it

Yeah especially when you get $10k off sticker .

 

[Echo4papa]

I’m over it, I read about it a little while back and it seems like everything the government puts out it’s open to interpretation. It could go up down left right depends on who’s reading it. I hope it works out the way OP is thinking. Im going the opposite way and ordered a 392.

There's really no interpretation. The tax credit is applied to your overall tax liability (what you owe based on your income, deductions etc.). What you actually pay or get as a refund at the end of the year is inconsequential as that's the difference between your tax liability and what you paid in taxes during the year. Two separate things.

Edit: All the OP is saying is that, at the end of the day, once he gets that credit back in his refund, the adjusted cost of the 4xe is cheaper.

 

[Monster1926]

There's really no interpretation. The tax credit is applied to your overall tax liability (what you owe based on your income, deductions etc.). What you actually pay or get as a refund at the end of the year is inconsequential as that's the difference between your tax liability and what you paid in taxes during the year. Two separate things.

Edit: All the OP is saying is that, at the end of the day, once he gets that credit back in his refund, the adjusted cost of the 4xe is cheaper.

I know what the op is saying. What I’m saying is when they do their taxes next year for 2021, if you only owe say $2000 you will not get the excess from the $7500 credit back in the forum of a refund.

 

[Ratiogear]

I know what the op is saying. What I’m saying is when they do their taxes next year for 2021, if you only owe say $2000 you will not get the excess from the $7500 credit back in the forum of a refund.

No, that's not true.

There's even a thread in this forum of someone who has taken advantage of PHEV tax credits multiple times.

'What you owe' is what you are in deficit for taxes for at the end of year when you file. But if you get a 1200$ tax refund every year (because your employers are overtaxing you slightly in each paycheck), that does not mean you now ineligible for the tax credit.

Like think about that for a second. If it worked the way your post is implying (which may not be what you meant to imply), I could talk to my payroll department and ask them to hold 0$ for federal income tax, in order to increase "what I owe" at end of year. And that would make me receive a larger PHEV credit than someone in my exact situation who withheld taxes correctly every month?

The PHEV credit applies to your total tax liability, meaning the total amount of taxes you pay, period. Meaning, every federal income tax line item on every paycheck for the year, for basic salaried workers.

Here's the relevant info from title 26:

(B) Limitation based on amount of tax
In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of—

(i) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over​

(ii) the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year​

​

So if your tax liability is greater than your total sum of other tax credits, you get the refund.

Total income - all tax deductions =total liability. Total liability - all tax credits = Amount owed.

If your liability is greater than zero, you cannot receive more back from the government than you paid in taxes using "NON REFUNDABLE" tax credits. The PHEV credit is non refundable.

So if you are making 60k a year, you pay around 10k in taxes, but only 6k is federal income tax. At this bracket, you shouldn't be buying a car. But let's say you received a (non-taxable) life insurance payout from your relative, and use that to buy the 60k wrangler. When you file your taxes next year with a total tax liability of ~6k, the maximum you can get back in your refund check would be that ~6k, not 7500.

For anyone making around 80 or more, you would be eligible for that full 7500, assuming you didn't have an excess of deductions or credits already.

 

[rent]

I know what the op is saying. What I’m saying is when they do their taxes next year for 2021, if you only owe say $2000 you will not get the excess from the $7500 credit back in the forum of a refund.

We need to be precise here. Saying "if you only owe $2000" is confusing. It could be read as "if you have to pay the IRS $2000 (because of under-withholding)." The $7500 credit is fully yours as long as you have $7500 in tax liability. What you get in refund or have to pay the IRS before factoring in the $7500 has no effect on if you can get this credit.

 

[Monster1926]

No, that's not true.

There's even a thread in this forum of someone who has taken advantage of PHEV tax credits multiple times.

'What you owe' is what you are in deficit for taxes for at the end of year when you file. But if you get a 1200$ tax refund every year (because your employers are overtaxing you slightly in each paycheck), that does not mean you now ineligible for the tax credit.

Like think about that for a second. If it worked the way your post is implying (which may not be what you meant to imply), I could talk to my payroll department and ask them to hold 0$ for federal income tax, in order to increase "what I owe" at end of year. And that would make me receive a larger PHEV credit than someone in my exact situation who withheld taxes correctly every month?

The PHEV credit applies to your total tax liability, meaning the total amount of taxes you pay, period. Meaning, every federal income tax line item on every paycheck for the year, for basic salaried workers.

Here's the relevant info from title 26:

​

So if your tax liability is greater than your total sum of other tax credits, you get the refund.

Total income - all tax deductions =total liability. Total liability - all tax credits = Amount owed.

If your liability is greater than zero, you cannot receive more back from the government than you paid in taxes using "NON REFUNDABLE" tax credits. The PHEV credit is non refundable.

So if you are making 60k a year, you pay around 10k in taxes, but only 6k is federal income tax. At this bracket, you shouldn't be buying a car. But let's say you received a (non-taxable) life insurance payout from your relative, and use that to buy the 60k wrangler. When you file your taxes next year with a total tax liability of ~6k, the maximum you can get back in your refund check would be that ~6k, not 7500.

For anyone making around 80 or more, you would be eligible for that full 7500, assuming you didn't have an excess of deductions or credits already.

“When you file your taxes next year with a total tax liability of ~6k, the maximum you can get back in your refund check would be that ~6k, not 7500.”

I believe this is exactly what I said in my post your responding to. I’m done btw I will not respond I do not care maybe I’m explaining the way I’m viewing it wrong maybe not. I do not care enough to keep going

 

[FloridaLarry]

Believe it or not you are all right, just a slight disconnect on communication.

Bottom line: everyone must claim this rebate on next year's taxes, regardless of whether you think you pay enough taxes or not, and see how it calculates out. Unless of course you lease, where your lessor gets 'your' rebate.

 

[Echo4papa]

This thread is funny and could be a case study in the need for proper terminology when communicating. I'm going to attempt to spell it out very specifically. Not directed to anyone here because I think most people here are saying the same thing just in a less specific way and it's causing confusion. I'm spelling this out more specifically for other people who stumble in here and get confused.

"What you owe" is vague and it's not clear to people if you're speaking about tax liability or the bottom line (line 22 below) when completing your taxes in terms of your refund or cutting a check to the IRS. It "should" be the bottom line (your refund or what you owe after subtracting what you paid in taxes from your tax liability) but it seems some people are using it to mean tax liability instead.

Tax Liability has a more specific meaning and shouldn't be easily confused with your refund or amount you owe. Line 15 in the image below (Total tax) is your tax liability. This is the number that matters when determining your ability to make use of the tax credit from a PHEV.

Line 22 (Amount you owe) or 20a (Estimated Tax Penalty) doesn't matter at all when determining if you qualify for the tax credit and/or how much of it you're able to receive.

Example A) If my tax liability is 10k, but I paid in 10k in federal income tax through the year, I owe nothing and I get no refund. My tax bill is paid in full. However, because my tax liability is still $7500 or more, I'm able to claim the entire tax credit from the 4xe purchase. This would then add into my total payments (line 18) and now I've paid in 17,500 for the year (10k federal income tax withheld and the 7.5k tax credit). Since I've paid in 17,500 and my tax liability is 10k, I'm now getting $7500 as a refund.

Example B) If my tax liability is 5k, but I paid in 10k in federal income tax through the year, I've overpaid and I'm already due a 5k refund. However, since my tax liability was 5k, I can still claim the tax credit from the 4xe purchase, but I'm only eligible for the amount of my tax liability up to 7.5k, which is 5k in this example. So, my tax liability is still 5k, but now my total payments is 15k (10k in federal income tax withheld, plus 5k from the tax credit). I'm now getting a refund of $10k.

Example C) If my tax liability is 4k but I only paid 2k in federal income tax through the year, I've underpaid and I owe the IRS another 2k. However, because I purchased a 4xe and can claim the tax credit (for my tax liability up to 7.5k) for 4k. Now my total payments is 6k (2k in federal tax withheld and 4k from the tax credit). Instead of owing the IRS 2k, now I'm getting a refund of 2k (total payments of 6k minus total tax of 4k).

The tax credit does not carry over to the next year. If you're only able to claim a portion of the credit, you lose the rest, you can't claim it in subsequent years.

Taxes can get a bit complex but I've kept these examples basic and straight forward. For your specific scenario, if you're unsure, I'd suggest seeking the advice of a tax professional.

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