Tax Credits

[Greg]

In the last handful of years we have ended up owing on our taxes, we are dual income with no kids and pretty decent pay for both of us. We are both claiming '0' on our taxes, and I pay an additional $220 extra per month towards taxes ($200 Fed, $20 State).

Writing off our paid home interest used to help, I try to write off expenses for work & business and it helps, but usually we still end up owing.

I know there are a bunch of home related energy efficient tax breaks (Solar, etc) you can apply, but those probably won't happen.

The one I'm interested in is a hybrid or electric car tax break... now I'm a hardcore ICE guy, I dislike EV's but could stomach a hybrid. Looks like there's a $7500 tax break for buying new. A new Prius is around $30k, which isn't terrible.

What I'm thinking about is buying a new Prius as a DD in say January, drive it for a year and sell it lightly used. Buy another one the following year, rinse and repeat. Any reason someone couldn't repeat that every year and take the tax credit? Anyone else doing this?

Anything else worth looking at for a tax break?

I realize that taxes, EV's and Hybrids are a controversial subject so please don't hijack the thread if it's not tax credit related.

 

[Kiel]

following as I also am in the same boat, and still always owe taxes some how

 

[Pike2350]

The big question is would the car sell for enough to make it worth it?

EV's don't hold their value all that well. I am not 100% sure on the hybrids, but it has to be a plug in hybrid (small list of available qualifing vehicles)...not the typical Prius type hybrid.

Also make sure you look at it. I debated a Wrangler 4xe for this reason but ultimately when you see the resale on them is lower then standard Wranglers and they only qualify for $3500 credit it just didn't make sense.

Here is the list of qualifiers....and I only see 6 qualifying plug-ins in the list.

https://www.cars.com/articles/which-electric-cars-are-still-eligible-for-the-7500-federal-tax-credit-429824/

 

[jeeper]

I have never seen where spending more money to pay less taxes makes sense. If an EV costs you $30,000, and you get $7,500 off your tax bill... you still spent and extra $22,500 on a car you don't want. I know that's a very simple equation and it all plays out different when the picture is looked at as a whole.. but the principle is there. also consider sales tax, registration fees, etc and you really don't come out ahead.

Finding larger and more permanent solutions is a better route.
You do a lot of vehicle repair. Make it a business. You charge for it now. Now your tools are write offs. Your shop space is a write off. The truck and trailer you bought to pick up customers vehicles for repair is a write off. It's not your fault you don't have much business or income yet.. you are new. In 5 years, shut the business down. Try a welding company next time.

YMMV.

 

[Greg]

The big question is would the car sell for enough to make it worth it?

EV's don't hold their value all that well. I am not 100% sure on the hybrids, but it has to be a plug in hybrid (small list of available qualifing vehicles)...not the typical Prius type hybrid.

Also make sure you look at it. I debated a Wrangler 4xe for this reason but ultimately when you see the resale on them is lower then standard Wranglers and they only qualify for $3500 credit it just didn't make sense.

Here is the list of qualifiers....and I only see 6 qualifying plug-ins in the list.

https://www.cars.com/articles/which-electric-cars-are-still-eligible-for-the-7500-federal-tax-credit-429824/

I get a supplier discount thanks to my employer, so hopefully I'd start out a little cheaper than most. I'd shoot for something with the highest tax break.z 1

I'm not interested is a EV at all, but a Hybrid. Hopefully it'll hold value better, I don't see why it wouldn't. I'm not too sure about the plug in hybrid... sounds more complicated than something like a Prius, but if it doesn't qualify then it's pointless.

I'll have to do some research, seems like the tax credit is becoming more restrictive as time passes.

 

[Gravy]

Definitely agree with Brian. When you look at depreciation, insurance, registration etc. It becomes like cutting off the top of the blanket so you can sew it onto the bottom and make a longer blanket.
Consider his advise about a LLC and lower your tax liability.
My advertising guy makes some very poor sponsorship choices 🧐😉

 

[Greg]

I have never seen where spending more money to pay less taxes makes sense. If an EV costs you $30,000, and you get $7,500 off your tax bill... you still spent and extra $22,500 on a car you don't want. I know that's a very simple equation and it all plays out different when the picture is looked at as a whole.. but the principle is there. also consider sales tax, registration fees, etc and you really don't come out ahead.

Finding larger and more permanent solutions is a better route.
You do a lot of vehicle repair. Make it a business. You charge for it now. Now your tools are write offs. Your shop space is a write off. The truck and trailer you bought to pick up customers vehicles for repair is a write off. It's not your fault you don't have much business or income yet.. you are new. In 5 years, shut the business down. Try a welding company next time.

YMMV.

Hence the idea of buying the car for the credit, then selling it the following year to recoup costs and doing it again. It would be a lightly used, low mileage car and easy to sell, IMO.

I already do the business writeoffs and depending on what all I claim, we come out barely ahead or far behind. Just depends on what I can justify to write off for the year.

 

[J-mobzz]

I personally can see added value in having a brand new car to drive to and from work every day that can factor into the decision too. This decision doesn’t have to be solely a financial one for someone in your current situation. If you can pay less taxes and improve the quality of your commute with a nice easy to drive under warranty vehicle. Why not.

 

[glockman]

Hence the idea of buying the car for the credit, then selling it the following year to recoup costs and doing it again. It would be a lightly used, low mileage car and easy to sell, IMO.

I already do the business writeoffs and depending on what all I claim, we come out barely ahead or far behind. Just depends on what I can justify to write off for the year.

You own RME, you have a number vehicles related to that business. All those vehicles including your new truck should be fully depreciated for taxes. Doing your own taxes or going to HR block isn't going to get the best bang for your buck.
I had a small drop ship business for motorcycle parts that did under $10k per year and my tax guy depreciated my truck and all my motorcycles for that. It was far more write offs than the business generated in total revenue. Get a good tax guy and pay him the less than the $200 a month and you'll get a refund id guarantee.

 

[Greg]

I personally can see added value and having a brand new car to drive to and from work every day that can factor into the decision too. This decision doesn’t have to be solely a financial one for someone in your current situation. If you can pay less taxes and improve the quality of your commute with a nice easy to drive under warranty vehicle. Why not.

Another reason to consider a car, and at least with a Prius (although it sounds like it doesn't qualify) it would get 45-50+ MPG while the vehicles we currently DD get 15 MPG.

 

[Cody]

Open a brewery. Then you can have a ton of business loss to offset your complete lack of income. It's a dream.

But I agree with the above. You can certainly have a home based business as a fab/mechanic or...cat breeder? Do you still do that? At that point a lot of tools, a % of your mortgage, mileage etc etc can be used to offset income. RME Is a business and I assume you do this already, but all of the money spent on your builds that then go into this site as content should absolutely qualify as a business expense. Trips for trip reports---fuel, food, and probably even the tow-rig payment can all pretty reasonably be justified as an expense for RME as a business.

I'm guessing RME is a partnership or LLC. If you're worried about equality with those write-offs, you could set up a second business and change the ownership of RME from yourself to the new business, then that business (GregCo)could write those costs off. RME income would fall to GregCo, then your expenses are deducted from that before being distributed out to your personal taxes via K1.

In the end, DINK's get hammered with taxes. If you have kids you can set up family businesses to push some of your income over to your kids to help reduce your taxable income, but I don't think you can do that with cats or cars.

 

[Greg]

You own RME, you have a number vehicles related to that business. All those vehicles including your new truck should be fully depreciated for taxes. Doing your own taxes or going to HR block isn't going to get the best bang for your buck.
I had a small drop ship business for motorcycle parts that did under $10k per year and my tax guy depreciated my truck and all my motorcycles for that. It was far more write offs than the business generated in total revenue. Get a good tax guy and pay him the less than the $200 a month and you'll get a refund id guarantee.

I do just that and will write off the F250 we bought this year. I hope the IRS never checks what I claimed for the '97 TJ I bought 2 yrs ago. 😉

I have been doing my own taxes after less than stellar results with paid tax services. At least I can dial in my potential for audit and push it to where I'm comfortable.

 

[Cody]

I do just that and will write off the F250 we bought this year. I hope the IRS never checks what I claimed for the '97 TJ I bought 2 yrs ago. 😉

I have been doing my own taxes after less than stellar results with paid tax services. At least I can dial in my potential for audit and push it to where I'm comfortable.

Paid tax services, or an accountant? You need an accountant. Not H&R Block.

 

[Greg]

Paid tax services, or an accountant? You need an accountant. Not H&R Block.

Not H&R Block, but not an Accountant... you're right. Probably worth paying for at this point.

 

[Cody]

Not H&R Block, but not an Accountant... you're right. Probably worth paying for at this point.

I think so. A small business accountant. I have a referral in Utah, but you might want to find one in CO.

Between my wife's business and our personal's, we pay under $1k for tax planning and preparation. We save way more than that every year on all the ways they know how to reduce our taxable income. None of it is shady, it's just using all the tools and strategies that are available...most of which are only known by people who do that sort of thing for a living.

Hell, I bet you pay almost 20% in effective tax rate. If they can find ways to lower your taxable income by $5k than you'd save $1k in taxes.

 

[SoopaHick]

I think so. A small business accountant. I have a referral in Utah, but you might want to find one in CO.

Between my wife's business and our personal's, we pay under $1k for tax planning and preparation. We save way more than that every year on all the ways they know how to reduce our taxable income. None of it is shady, it's just using all the tools and strategies that are available...most of which are only known by people who do that sort of thing for a living.

Hell, I bet you pay almost 20% in effective tax rate. If they can find ways to lower your taxable income by $5k than you'd save $1k in taxes.

I would like to know more about this referral you have... I struggle understanding the "write off game." Between the two welding businesses and my day job never taking out enough I know I'm going to get bent over and punished in the spring.

 

[Kevin B.]

I'm just here for the RME Prius build thread.

 

[Greg]

Open a brewery. Then you can have a ton of business loss to offset your complete lack of income. It's a dream.

But I agree with the above. You can certainly have a home based business as a fab/mechanic or...cat breeder? Do you still do that? At that point a lot of tools, a % of your mortgage, mileage etc etc can be used to offset income. RME Is a business and I assume you do this already, but all of the money spent on your builds that then go into this site as content should absolutely qualify as a business expense. Trips for trip reports---fuel, food, and probably even the tow-rig payment can all pretty reasonably be justified as an expense for RME as a business.

I'm guessing RME is a partnership or LLC. If you're worried about equality with those write-offs, you could set up a second business and change the ownership of RME from yourself to the new business, then that business (GregCo)could write those costs off. RME income would fall to GregCo, then your expenses are deducted from that before being distributed out to your personal taxes via K1.

In the end, DINK's get hammered with taxes. If you have kids you can set up family businesses to push some of your income over to your kids to help reduce your taxable income, but I don't think you can do that with cats or cars.

I've been doing exactly what you're talking about; I expense new cameras, hotels, meals, fuel, etc as a business expense. Also tools, equipment, the home office, advertising, hosting and more. And we still get beaten up come April.

I'll have to look into GregCo... I like the idea.

 

[Cody]

I've been doing exactly what you're talking about; I expense new cameras, hotels, meals, fuel, etc as a business expense. Also tools, equipment, the home office, advertising, hosting and more. And we still get beaten up come April.

I'll have to look into GregCo... I like the idea.

Well.....stop making so much money then

I think you already do the other stuff...401k's, Roth, etc. I'd definitely seek out a good small business accountant and see if they can help with some tax planning. This is the time of year to be doing it. I just filed my 2023 business taxes today ha ha.

 

[Gravy]

I would go so far as to recommend interviewing two to three tax professionals based on the type of businesses you have or intend to use for limiting tax liabilities. Our business networking group even recommendeds you ask for contact information for other customers who use their services to make sure they will be a good fit for you. It's your money, you worked hard for it, work hard to protect it.

An tax specialist that is good at knowing what is best for a restaurant wouldn't be good necessarily if you were a mechanic. Just like a dentist wouldn't be the all that good at foot surgery.