Does California have a seperate tax credit/deduction in addition to the Federal Tax Credit? Some state do, does California?

How much are people receiving for their IRS refund for purchasing a Civic?


Thanks,
Shawn

 

This site seems to provide a pretty good summary of hybrid incentives from state to state.

http://go.ucsusa.org/hybridcenter/incentives.cfm

 

There is no tax incentive for hybrids in California.

Your refund depends on how much tax you have withheld from your paycheck. I think you're asking how much credit you'll get back for buying an HCH. The IRS hasn't published official figures yet, but based on the language of the law the estimate is about $2100.

 

so, does this tax credit come in a form of a refund? ie if the credit is worth $2,100 we get a refund of $2,100?

 

It's not a refund per say. But rather a credit towards the amount you owe the IRS. Say you owe $3,000. And you have a hybrid tax credit of $2,100. You would only owe $900. I don't believe you will get any additional refund if you are getting a refund anyways.

-Ryan

 

Sure you will. To use another example, let's say you had $5000 dollars in taxes withheld from your paychecks. You fill out your tax return at the end of the year and find that your income tax is only $4000. So you'll get a $1000 refund. But then, oh my gosh, you forgot to claim the hybrid tax credit. You put that into your tax return and now your income tax is $1900 instead of $4000, and your refund will be $3100 instead of $1000.

 

Keep in mind YOU can control how much is withheld from your paycheck each week.

You can go to your employer and fill out a new W4 form.
On it you write in how many deductions you want to claim.
You have flexibility on this as long as you withhold enough during that year.
It is not illegal to write in any number you want from 0 to 10.
If you write in over 10 you have other considerations you must look into.

The more deductions you claim the less they withhold every week.

Note: How much tax you owe when you do your taxes the following April 15th is separate from how much was withheld.
When you do your taxes if your company withheld too much you get a refund.
If they withheld too little you write a check.

For some reason people LOVE big refunds.
Actuall big refunds are dumb.
You lent all that money but were paid zero interest on the loan you made to Uncle Sam.

What is smarter is to get no refund.
That means you got the use of your own money earlier - each paycheck was a little larger.
What is evern smarter than that is to claim more exemptions on your W4 and end up having to write a small check when you do you taxes - but watch out, if that check is too big you will have to pay a penalty.
So the smartest people carefully calculate how much tax they think they will have to pay when they file the following April 15th and adjust their employer's withholdings accordingly.

Then the geniuses raise their withholdings to the max, 10, for the beginning of the year and change them to zero about March, April, May or June depending on their expected tax obligation.
The reason this is so smart is you get the use of more of your money earlier in the year.
Of course you must plan for the fact that your paychecks will be smaller later in the year.

 

Well, for my 2005 year, I had between 28% and 33% deducted from my paychecks, totalling $43k (after $25k deductions). For the first year since I got married I received a refund of a whopping $1,700 (usually, since I married 5 years ago, I owe about $500). I doubt the credit will help me if it doesn't actually refund money back if I don't owe this year. But, it'll certainly help to make sure I don't owe at all.

I try to make my money work for me in the meantime, I actually don't like refunds or owing the IRS at the end of the year. I'd rather it be invested in the meantime, making me more money in the long run, but thats just me, not most Americans.


Thanks,
Shawn

 

There is a tax incentive in the works in California. It was mentioned in the link that I posted earlier in this forum. It would allow a $3,000 deduction starting with the 2006 tax year. It is bill number AB 2616. If you want to check out the status of this bill on the official website, go to the following link and search for bill number 2616.

http://www.leginfo.ca.gov/bilinfo.htm

As for federal, it is a credit and is not based upon how much is deducted from your paycheck. It is based upon your tax liability. As long as your tax liability is greater than your credit, you can fully utilize the credit. If for example, your tax liability before the hybrid credit is only $1500, you would only be able to use $1500 of the available $2100 credit. The bottom line here is that you cannot have a negative tax liability.

This is all based upon my previous experience dealing with tax credits and their rules on my own taxes.

 

Of course the tax credit will help you. Let's assume that the IRS finalizes the estimate of $2,100 for the 2006 HCHII. It will reduce your tax liability by $2,100. Whether or not you get a refund or owe money is based upon taking your tax liability and subtracting how much you have already paid to the IRS through your paycheck deductions. If your tax liablity is greater than your paycheck deductions, you still owe the IRS money. If your paycheck deductions are greater than your tax liability, the IRS owes you money. As you can see, reducting your tax liability can only benefit you. The only thing is that you can have a zero tax liability, but you cannot have a negative tax liability. Most people will not have a zero tax liability.

Examples:

The $2,100 hybrid tax credit would turn owing $500 to the IRS into them owing you $1,600.

The $2,100 hybrid tax credit would turn your $1,700 refund into a $3,800 refund.

Again, these assume that your tax liability is not reduced to zero.