You say your taxes aren’t complicated enough to hire a CPA or EA to help you. Or, you think all you need is someone to prepare your tax returns to save you some time.
Unfortunately, that is a myth that is rampant in the marketplace. Although it is true that I can’t work magic and change the tax code, what I can do is continuously stay informed on both federal and state tax statutes and incentive programs that will allow me to take advantage of tax incentive programs (and to recommend them to Credo’s clients).
About a month ago, I was sitting with my good friend and soon to be closer business partner, Michael Beinenson, the owner of Tax Incentives, Inc. www.taxincentives.com. For those of you that have worked with Michael, you know he is scary smart in this area. So much so, that most of the time, he leaves me upset with myself that I didn’t think of it first. He definitely stirs the competitive juices inside me.
He made me realize that just knowing what all the tax credits were and how to get them was only half the battle! You need to take it a step further and think about how to turn these credits into cash in your pocket through creative, out-of-the-box thinking.
Beyond the scope of this article is the myriad of ways a company can use tax incentives through reduction in their payroll taxes/costs, but that is one example of a topic that Michael and I talk about regularly. The goal, of course, is to bring “package” money-saving solutions to Credo clients, with the clear mission of the firm in mind, to help Credo’s clients prevent unnecessary, senseless transfers of wealth to others (private or public).
So, I couldn’t help myself but to write about this latest little tax play. Allow me to explain:
The tax code allows tax credits for the purchase of new, electric vehicles. There is a federal tax credit of $7,500, and a Georgia State Credit (other states vary, and for states with no tax, this strategy probably will not work) of $5,000.
In order to get both credits, you have to purchase the car. So, you would obviously say, “Ok, that’s great if I have $35,000 sitting around to buy a car, and then, tell me again how that makes the car free?”
Well, normally you would be right, but there’s something that is a little less known. You can also lease the car and still qualify for the $5,000 state tax credit (credit = $ amount deducted right off your Georgia income tax bill). This credit can be earned every two years, and you have 5 years to use it all up. Think of it like having $5,000 in Georgia income tax gift cards, and you can use those to pay your tax instead of paying it with your hard-earned cash. So, basically, if you owe state tax at an average of $1,000 per year for the next five years, then this credit is as good as cash. A lot of people use the entire credit in year 1.
So, here’s what I did:
- Lease the car for 24 months @ $300 (this number will vary depending on trim package and negotiation) per month (and of course I can make a referral to a good sales guy if anyone is interested). Also, you need to keep in mind that this particular vehicle needs to be charged every 90 miles driven. So, it will not work for people that drive more than that on a consistent daily basis.
- Tax Credit = $208 per month.
- Net cash spent for the vehicle = $92 per month ($300-$208).
- What I spend (or spent) on gasoline per month = at least $400 per month.
- My net cash flow profit = ($400-$92) = at least $308 per month (in my case this play is a lot better than free; I am actually making both a cash and real profit on this transaction).
- At the end of the lease, I can turn it in for a new electric car and get a new $5,000 credit! I also save on any/all maintenance costs, of course. And, it is likely that your insurance cost will go down, but that will vary by person.
Now, everyone’s personal situation will vary, and you will have to do your own analysis to see what it will look like for your unique situation, but you can see how this works. Instead of my vehicle being a monthly expense for me, it is a profit center that generates a cash profit for me.
This is certainly not the only way to use tax incentive statutes in a creative way, but it is a very simple example.
Bottom Line – I don’t ever play the “do it yourself” role. I have learned my lesson(s). I always go to experts, figure out what I have to invest in their services, and then calculate my return on that investment. I would call using experts to get an ROI both logical and rational. I am hoping that if nothing else, this article can help you to evaluate the “do it yourself” projects you have going on right now. And, if anyone offers you services, challenge them to help you calculate the ROI on those services. There’s nothing wrong with that!
Remember, Credo is all about working with you and solving problems together. We don’t know everything, and we don’t claim to. But, we will work our hardest to collaborate with as many experts that we can to bring you value. That is a promise that I have no hesitation in making.
To learn more about more about Electric Vehicle Incentives please click here.