Dear Liz: Not a question, but a tip for your readers. I bought a plug-in hybrid in 2018. I couldn’t take advantage of the $7,500 federal tax credit because my income was too low to pay much in federal taxes. So I converted $30,000 of my IRA to a Roth IRA, which added that money to my income for 2018, allowing me to take full advantage of the credit. Hey, I even got some money back. I can’t touch that Roth account for five years, or else the income it generates won’t be tax-free, but when the time comes for my mandatory withdrawals, I’ll tap into the remainder of my regular IRA. This might be of help to some of your readers.
Answer: Normally conversions from a regular IRA to a Roth trigger a hefty tax bill, but your credit allowed you to convert tax-free. Leasing is another option to consider with hybrids and other cars that offer a federal tax credit. The value of the credit typically is built into the deal, so you benefit even if you don’t have a federal tax bill to offset.
Dear Liz
I purchased a Hybrid this in 2019.
I wonder if there is any tax credits available as I get my 2019 info available for my enrolled agent – if not is there anything other than the large amount of sales taxes I paid on this car ( around 10% I guess) of the 40,000 price
That depends on the car. You can see which vehicles still have a credit available here: https://www.fueleconomy.gov/feg/taxevb.shtml