$7500 EV tax credit
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bigredfive
New Member

$7500 EV tax credit

Do I have to claim the $7500 EV tax credit in the year the car was purchased? We bought a new 2019 Leaf this year, 2020, but my income is considerably lower this year due to Covid. As such I don't think I'm going to have $7500 in liability to take full advantage of the credit. I know I could take some cash out of my 401k penalty free this year to increase my income, but I would rather just take the credit next year if possible. Thanks. 

3 Replies
DoninGA
Level 15

$7500 EV tax credit

The credit can only be claimed in the year of purchase.  It cannot be carried forward to the next tax year.

Critter-3
Level 15

$7500 EV tax credit

Taking a 401K distribution is an option ... another option to keep the money is to roll a 401K contribution to an IRA and then converting that to a ROTH ... this will only work if you have a zero balance or no basis in the IRA to start with.  

dmertz
Level 15

$7500 EV tax credit

A rollover to a Roth IRA from a 401(k) or similar qualified retirement plan will almost always be partially, if not entirely taxable, so, if a distribution from the 401(k) is permitted, rollover to a Roth IRA is a reasonable way to increase taxable income.  If the distribution is not permitted from the plan, perhaps the plan allows In-plan Roth Rollovers that are not subject to the same distribution restrictions as a rollover to a Roth IRA would have.

 

Regardless of the amount of balance or basis in traditional IRAs, conversion to Roth of up to the amount that it increases tax liability that would be covered by the otherwise unused EV tax credit ALWAYS makes sense (except in the case where the resulting increase in AGI has an effect on something other than the income tax, such as Medicare IRMAA).

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