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  • Tax Incentives: FAQ

    What's the difference between a deduction and a credit?

    A tax deduction reduces the amount of income for which you are taxed. For example, if your taxable income were $50,000, a $2,000 deduction would reduce it to $48,000. So, you would pay taxes on an income of $48,000 instead of $50,000. This means your actual savings would be a fraction of the $2,000 deduction.

    A tax credit reduces the total amount of income tax you owe. So, if you owed $10,000 in federal income tax, a $2,000 credit would reduce the amount you owed to $8,000. With a credit, your actual savings would be $2,000.

    Where can I find information on State incentives?The U.S. Department of Energy's Alternative Fuels Data Center maintains a list of State & Federal Incentives & Laws for HEVs and alternative fuel vehicles.

    Attached to this post is also a PDF with a nice overview of the Federal credit program for both vehicles and refueling too.

    --------------------------------
    More details...

    Federal:
    First of all, DON'T CONFUSE ALTERNATIVE FUEL CREDITS WITH HYBRID CREDITS! They both are claimed on Form 8910, but hybrid vehicle credits phase out as the automaker puts more of them on American highways. However, our alternative fuel credits retain their full value no matter how many Civic GX's or EPA certified conversions hit the road. Note that our alternative fuel credits will sunset in December 2010 but it is widely assumed Congress will extend them.

    Alternative fuel vehicle credits are based on the year the dedicated alternative fuel vehicle system was "placed into service." So if you are the first consumer of a new Civic GX from Honda then the credit is only available to you for the tax year in which you placed the vehicle into service. If you convert a vehicle to become a dedicated NGV using an EPA or CARB certified retrofit then you can take the credit in the year the conversion was performed. If the buyer is a tax-exempt entity (municipality, school district, church/foundataion, etc.) then the seller can take the credit.

    Note that the federal credit varies by gross vehicle weight with steps from 4k/$8k/$20k/$32k (see attached PDF) but for our discussion let's assume $4k as most of us on this chat board will be talking about vehicles under 8,500 lbs. Let's review a couple of examples:

    Taxpayer #1
    His total tax owed before payments and credits (Form 1040 line 44) is $20,000. His employer withheld $26,000 (line 65) so normally he would be expecting a $6,000 refund check. But this year he bought a new Civic GX so he also filed Form 8910 for the $4,000 tax credit. He also installed a Fuelmaker at his home so he filled out Form 8911 to get the $1,000 credit too. These flow to line 55 which shows $5,000 in "Other credits."

    Now, thank heavens the number in line 45 (Alternative Minimum Tax) was zero. Otherwise, the aforementioned Forms 8910 and 8911 would not have been filled out as he would not have qualified for the credits under the AMT rules. Why some folks get hit with AMT while others don't is a question reserved for those skilled in the black art of tax accounting suffice it to say most that do get hit with this have either incomes over $250,000 or they have a lot of tax-advantaged income such as long-term capital gains, tax exempt bond interest, etc.

    Here is how his tax burden would be calculated for our first example:
    Line 44 = 20,000 (Tax owed)
    Line 46 = 20,000 (no AMT for this lucky fellow)
    Line 55 = 5,000 (alternative fuel vehicle and refueling credits)
    Line 56 = 5,000
    Line 57 = 15,000 (line 56 is less than line 46 so he is OK using all of the credit)
    Line 63 = 15,000 (total tax, assuming no self employment or other taxes owed)
    Line 65 = 26,000 (withheld by his employer)
    Line 72 = 26,000 (let's assume no children, earned income credits, etc.)
    Line 76 = 11,000 (this is the amount of the IRS check sent to him)

    Taxpayer #2:
    His total tax owed before payments and credits (Form 1040 line 44) is $3,000. His employer withheld $2,000 (line 65) so normally he would be expecting to pay $1,000 with his return. But this year he bought a new Civic GX so he also filed Form 8910 for the $4,000 tax credit. This flows to line 55 which shows $4,000 in "Other credits."

    Now, as he is a lower-income taxpayer it is almost a given that the number in line 45 (Alternative Minimum Tax) was zero.

    Here is how his tax burden would be calculated:
    Line 44 = 3,000 (Tax owed)
    Line 46 = 3,000 (no AMT)
    Line 55 = 4,000 (alternative fuel vehicle credit)
    Line 56 = 4,000
    Line 57 = 0 (line 56 is more than line 46 so he cannot use all of the credit)
    Line 63 = 0 (total tax, assuming no self employment or other taxes owed)
    Line 65 = 2,000 (withheld by his employer)
    Line 72 = 2,000 (let's assume no children, earned income credits, etc.)
    Line 76 = 2,000 (this is the amount of the IRS check sent to him)

    So in his situation instead of writing a check to the IRS of $1,000 he now is getting back as a refund all of the $2,000 he paid in over the year. But since his total federal tax burden was only $3,000 vs. the $4,000 alternative fuel vehicle credit, he "left on the table" $1,000 that cannot be carried over to future years.

    ----------------------------------

    Utah:
    This one is simple. Look at the tax owed on line 16 of the state income tax form TC-40.
    See: http://www.cngchat.com/forum/showthread.php?t=21

    If it is larger than the total on your TC-40V's (Clean Fuel Vehicle Tax Credit) then list the TC-40V totals on line 17. If it is less than this, you should make sure you only claim up to the number on line 16. Whatever is leftover can be claimed in subsequent years (up to 5 years, I believe).

    Note that Section C of Form TC-40V is for the taxpayer to complete, and the instructions on the back indicate that a new form must be completed each year for carryover. This form is not included in your tax filing so just make sure if you carry over that you have one TC-40V in your files for each tax year as you use up the credit.

    DISCLAIMER
    The information on this page should not be viewed as an official or legally binding document. Other requirements or exceptions may apply. For more detailed information, please consult an IRS tax representative and/or official IRS publications.
    Attached Files
    Last edited by John Mitton; 05-25-2008, 09:56 PM. Reason: Added some examples
    [ATTACH=CONFIG]temp_4586_1441434431016_578[/ATTACH]

  • #2
    Re: Tax Incentives: FAQ

    If I don't have any tax liablities, in other words I don't pay income tax, the tax credits and incentives wouldn't do me any good, right? If this is correct is there any rebates that would apply or benefit me?

    Comment


    • #3
      Re: Tax Incentives: FAQ

      First off, I'm not a tax accountant... As I understand it a tax credit would benefit anyone, even somebody that has no tax liability. You'd just do the forms and get a refund like others that "overpayed" taxes during the year.
      Last edited by CNGfamily; 03-25-2008, 05:13 PM.
      2008 GX (extended range, trunkless version)
      Polished Metal Metallic 2012 Civic Natural Gas
      Fuelmaker FMQ-2-36 (since 2001)
      Previously owned: 2000 GX (11 years), 1995 Bi-fuel Sonoma, 2000 Bifuel Tahoe, 2000 Bi-fuel F150

      Comment


      • #4
        Re: Tax Incentives: FAQ

        I do not profess to be a tax consultant either, but I have a lot of experience with customers dealing with this issue.

        You will not see cash back from this if you owe nothing. You should be able to file for the credit and take it off your bottom line tax obligation after all other deductions and credits have been applied.

        If you are concerned about your 08 filing, you may be able to work with a tax professional and maxamize your position for your 08 tax's. If you are tax exempt, the selling entity may claim the credit but must disclose this to you at time of sale and there is a form you must sign.

        As far as other incentives, they vary from location to location.
        [ATTACH=CONFIG]temp_4586_1441434431016_578[/ATTACH]

        Comment


        • #5

          Comment


          • #6
            Re: Tax Incentives: FAQ

            Watch out on the Federal credit - if you hit the alternative minimum tax - you will loose the credit unless you can claim business use or something like that - it is use or loose in the year the vehicle is purchased in - NO carry over. I just know we ended up loosing it due to our other tax liabilities/credits.
            Previously to filing our taxes, I was led to believe that you would just get the additional $4k on the Honda on top of any refund you were already getting. No so cut and dry. We bought ours in December so there was not any time to fix anything at that point. Just make sure you look further into it if you are "banking" on the entire credit.

            Comment


            • #7
              Re: Tax Incentives: FAQ

              I work at a ford dealer and the shop that we are sending trucks to are saying that after they convert non dedicated trucks to bifuel cost 12,000 but after the rebates and credits its about 2,000!!!!!!! i thought federal rebates and credits only applied to factory converted dedicated cars and trucks???????? does anyone actually know if this is valid?

              Comment


              • #8
                Re: Tax Incentives: FAQ

                Originally posted by CNGfamily View Post
                First off, I'm not a tax accountant... As I understand it a tax credit would benefit anyone, even somebody that has no tax liability. You'd just do the forms and get a refund like others that "overpayed" taxes during the year.
                Hey There I hope that is true what you are saying because I am in a similar situation. I Don't owe anything at the end of year and I was lead to believe that I will be getting $4000.00 back at the end of year if I purchased the CNG car. Do you have any new information that you can share with me.

                Thanks

                Comment


                • #9
                  Re: Tax Incentives: FAQ

                  Originally posted by taigacarol View Post
                  Watch out on the Federal credit - if you hit the alternative minimum tax - you will loose the credit unless you can claim business use or something like that - it is use or loose in the year the vehicle is purchased in - NO carry over. I just know we ended up loosing it due to our other tax liabilities/credits.
                  Previously to filing our taxes, I was led to believe that you would just get the additional $4k on the Honda on top of any refund you were already getting. No so cut and dry. We bought ours in December so there was not any time to fix anything at that point. Just make sure you look further into it if you are "banking" on the entire credit.
                  Hi do you happen to know if there is money given back if you don't owe tax to the government at the end of year.

                  Thanks

                  Comment


                  • #10
                    Re: Tax Incentives: FAQ

                    It is possible. Depending on where you are, and if the vehicle is being done for a fleet, special grants can be put together to offset the cost of conversion. This can be done through a number of different funding sources. Add in any state and federal incentives that may exist for that specific situation, and it's possible.

                    Much of this funding may come directly from the Air District, Carl Moyer funds (depending on the vehicle being converted), Mobile Air Resources Board, etc. I would find it more surprising that you say it's a dual-fuel conversion, as opposed to dedicated. But again, depends on the recipient and the funding source.
                    [ATTACH=CONFIG]temp_4586_1441434431016_578[/ATTACH]

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                    • #11
                      Re: Tax Incentives: FAQ

                      What are the specific requirements to get back a rebate Utah State and Federal? Can the vehicle be bi fuel? If the vehicle is using a non EPA Kit can you get the rebate as long as it still passes Emissions?
                      Jim Younkin
                      www.younkincng.com

                      Comment


                      • #12
                        Re: Tax Incentives: FAQ

                        Hi younkin.
                        • There are no rebates (except some situations in California) only income tax credits as described in the opening post.
                        • The federal form is 8910 and if you have home refueling form 8911 too.
                        • Bi-fuel vehicles get no federal income tax credit, whereas Utah does provide state income tax credits for them (see Utah form TC-40V).
                        • Non-EPA certified conversions cannot be legally registered to use the public highways, thus no credits are available from the federal or state.

                        Comment


                        • #13
                          Re: Tax Incentives: FAQ

                          John, you stated:
                          "Non-EPA certified conversions cannot be legally registered to use the public highways, thus no credits are available from the federal or state."

                          What exactly does this mean?
                          Are you saying that if a non epa kits is installed on a car that you can't drive it on the road?
                          This does not make sense, where are you getting this idea?
                          I have spoken personally to a Utah Air Resources Board Inspector and as stated in my previous posts, I can smog and license any CNG car no matter where the kit is from? Jim
                          Jim Younkin
                          www.younkincng.com

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                          • #14
                            Re: Tax Incentives: FAQ

                            Can anyone recommend a tax consultant that has experience with the CNG issue. I don't want to take my questions to some Walmart cubicled HR Block rep and be lead wrong.

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                            • #15
                              Re: Tax Incentives: FAQ

                              can anyone tell me where to find information on the original cost of cng on a Dodge van. I have a dedicated van I'm going to apply for the credit on and I'd like to find the cost difference between cng and gas.

                              Comment

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