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Tax Sherpa by far is the best in fulfilling your tax needs. They provide top notch customer service and are always willing to help.

Neal is exceptional at the work he does and always looks out for the best interest of his clients. Serena is amazing and keeps communication line open at all time. Thank you Tax Sherpa for your service.


Tax sherpa has been quite good in helping me with my monthly accounting and understand tax saving strategies and has been very low effort on my end compared to tax services I have used in the past.

If you own your own business Tax Sherpas can really switch the extra tax burden on it head for you and save you thousands, while charging very fair fees for service.

The Tax Sherpa Mission

At Tax Sherpa, our mission extends beyond the numbers. We are passionately committed to empowering solopreneurs and small business owners by saving them tens of thousands on their taxes. We firmly believe that prosperity thrives when individuals retain more of their hard-earned money. It's not just about good business sense; it's about fostering a world where people's pockets, not the government's, hold the key to positive change.

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Pick any available time on our calendar to start saving today.

Our Services

Learn a little more about the core services we offer:


Tax Advisory

Unlock your path to significant tax savings with our Tax Advisory services. Our experts craft, implement, and consistently update tailored tax strategies that not only align with your unique business needs but also pave the way for maximum tax efficiency.


Tax Filings

Realize your tax savings annually without the hassle. With our Tax Filings service, we meticulously handle the paperwork, ensuring every tax advantage is captured when submitting to the government. Experience peace of mind, knowing that every deduction and saving is realized for you.



More than just numbers on a ledger, our Bookkeeping service helps you maintain a clear picture of your revenue and expenses. By seamlessly integrating tax strategies into your books, we ensure that your records not only stay organized but also accurately mirror your financial blueprint, keeping you aligned with your tax-saving goals.

About Us

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Neal McSpadden,
Chief Tax Strategist

I went from owing the IRS over $1,300,000 to Zero, and in the process of fixing my own mess I discovered the hidden world of tax planning.

Over the years, I've worked on over 50,000 tax returns covering billions of client earnings and have helped save clients hundreds of millions of dollars.

What I discovered through this whole process is that:

  1. The large companies (that can afford to pay 6-figure fees) get great tax advice.

  2. The simple W-2 earner with no other activities end up filing for themselves or go down to the corner tax preparer office. They generally get mediocre advice, but it's good enough for now.

  3. The people in the middle, solopreneurs and small business owners, can't afford the fees of the big companies and are unable to get good service from the corner preparers.

Those people are who we aim to serve.

Our Core Values

Our Philosophy

Our core philosophy is that the solopreneurs and small business people are the backbone of our entire society. Without them, nothing else works.

The current system that places undue tax burdens on this group needs to be changed and defunded.

Our Promise

Our promise to you is to craft an individualized plan for your individual situation. All taxes are personal, and everyone's life is different.

Our Guarantee

We guarantee you will save multiples of our advisory service fees.

When we create your custom tax blueprint we will show you exactly how much you might save based on your current circumstances.

Our Blogs

electric car transition from old credits to new

The Truth About the New Clean Vehicle Tax Credit

October 26, 20238 min read

Understanding the Basics: A Deep Dive into AGI, Tentative Tax, and MAGI

In the world of taxes, understanding the foundational concepts is crucial, especially for solopreneurs, 1099 contractors, and small business owners. If you're in this bracket, earning between $100k to $500k annually, it's essential to grasp these basics to make informed decisions about your tax strategies. Let's delve into three key terms: Adjusted Gross Income (AGI), Tentative Tax, and Modified Adjusted Gross Income (MAGI), and see how they tie into the New Clean Vehicle Tax Credit.

Adjusted Gross Income (AGI): AGI represents your total income minus specific deductions. It's the starting point for many tax calculations and determines your eligibility for several tax credits and deductions. For solopreneurs and small business owners, this might include business expenses, half of the self-employment tax, and contributions to SEP-IRAs or SIMPLE IRA plans.

Why it matters: Your AGI can significantly influence the tax benefits you're eligible for. A lower AGI might qualify you for certain tax credits, while a higher AGI might phase you out of others.

Tentative Tax: Once you've determined your AGI, the next step is to figure out your tentative tax. This is essentially the initial calculation of the tax owed based on your taxable income, before any credits are applied. It's a pivotal figure because it sets the stage for the final tax amount after all deductions, credits, and other adjustments are made.

Why it matters: Knowing your tentative tax helps you understand your tax liability before credits come into play. It's a snapshot of what you might owe without any additional interventions.

Modified Adjusted Gross Income (MAGI): While AGI is a common term in tax lingo, MAGI is a bit more specialized. It's your AGI with certain deductions added back in. MAGI is used to determine eligibility for specific tax benefits, including the New Clean Vehicle Tax Credit.

Why it matters: Even if your AGI is within a favorable range, your MAGI might push you over the threshold for certain tax benefits. It's crucial to know both figures to fully understand your tax situation.

Tying It All Together: The New Clean Vehicle Tax Credit The New Clean Vehicle Tax Credit is a prime example of why understanding these concepts is crucial. Your AGI and MAGI can determine your eligibility for the credit. If your MAGI is over a certain threshold, you might find yourself ineligible for the credit, even if you've made a qualifying purchase.

Personal Touch: Take the story of AJ, for instance. AJ invested in solar panels for his home, lured by the promise of a $15,000 tax credit. However, due to effective tax strategies we had implemented, his tax liability was already significantly reduced. As a result, he couldn't utilize the tax credit at all. Had AJ consulted with us before making the purchase, he might have made a different decision. It's a stark reminder of the importance of understanding your tax picture and consulting with experts before making significant financial decisions.

The New Clean Vehicle Credit: What You Need to Know

Historical Context

In the past, many electric vehicle buyers, especially those who opted for Teslas in 2022, found themselves in for a surprise when they realized they didn't qualify for any vehicle tax credits. This was a significant blow for many, including our client, AM, who was taken aback when we processed his 2022 taxes. The reason? A manufacturer cap on the old credit system, which Tesla had reached, leaving many of its buyers without the anticipated tax relief.

Inflation Reduction Act: A Game Changer

The Inflation Reduction Act brought about a much-needed change, revamping the credit system for electric vehicles. While the Act encompasses various provisions, its impact on the clean vehicle credit stands out, offering a fresh breath of relief for many electric vehicle enthusiasts.

New vs. Used Vehicle Credit: Know the Difference

New Vehicle Credit: The credit for new vehicles comes in two tiers: $3,750 or $7,500. The qualifying amount depends on the vehicle's assembly location and the origin of its components. The federal government has already determined these amounts, and for a comprehensive list of qualifying vehicles and their respective credit amounts, readers can refer to our detailed post here.

Used Vehicle Credit: For those considering a used electric vehicle, the credit calculation differs. The credit is the lesser of 30% of the purchase price or $4,000. However, like the new vehicle credit, it's subject to the taxpayer's income and tax liability limitations. Additionally, to qualify, the used vehicle's purchase price must be under $25,000, and it should be a pre-approved make, model, and year, as listed in the same table.

Commercial Credit: A Different Ballgame

For businesses or commercial vehicle buyers, the credit landscape shifts. The commercial credit is based on the depreciable basis of the vehicle after section 179 deductions, compared against 30% of its net depreciable basis. Furthermore, for vehicles weighing over 14,000 pounds, the maximum credit jumps from $7,500 to a whopping $40,000, making it a significant consideration for businesses eyeing larger electric vehicles.

The landscape of clean vehicle credits has seen significant changes, offering both opportunities and challenges. Whether you're an individual buyer or a business, it's crucial to stay informed and make decisions that align with your financial goals. As always, we're here to guide you through these complexities, ensuring you make the most of the available credits.

Key Caveats to Consider

Income Limitations:

When considering the new clean vehicle credit, it's essential to understand the income limitations that come into play. The credit's value is directly tied to your tax liability, which is influenced by your income. Here's a breakdown:

  • The Dual Challenge: The clean vehicle credit poses a unique challenge. On one hand, your income needs to be high enough to have a significant tax liability to claim the credit. On the other, it shouldn't exceed the set thresholds to remain eligible for the credit.

  • A Real-World Example: Consider a single filer with no dependents earning $50,000 annually. Their tax liability would be just over $4,000. So, even if they qualify for a $7,500 credit, they can only benefit from $4,000 of it. Now, if the same individual's adjusted gross income rises to about $75,000, their tax liability would exceed the $7,500 credit. This means the sweet spot for single filers to fully utilize the credit lies between an adjusted gross income of $75,000 and $150,000.

Tax Liability Limitations:

Understanding tax liability is crucial when considering the clean vehicle credit. Here's why:

  • The Common Misconception: Many individuals often confuse tax liability with the actual tax owed. This confusion stems from factors like withholding from W-2s, credits for children and other dependents, and the final figure that appears on the 1040 total tax. It's vital to differentiate between these concepts to grasp the credit's real value.

  • The Bottom Line: Your tax liability is the total amount of tax on your income. The actual tax owed is what remains after subtracting prepayments, credits, and other deductions. The clean vehicle credit is applied to your tax liability, not the tax owed.

No Rollover:

One of the most critical aspects of the clean vehicle credit is its "use it or lose it" nature. Here's what you need to know:

  • Immediate Use: If you qualify for a credit but don't have the tax liability to claim its full value, you can't carry forward the unused portion to future years. For instance, if you're eligible for a $7,500 credit but only have a $4,000 tax liability, you'll lose out on the remaining $3,500.

  • A Gentle Reminder: As this is a relatively new provision, many might not be aware of this limitation. It's essential to be informed and make vehicle purchasing decisions with this in mind.

For our solopreneurs, 1099 contractors, and small business owners, remember that our overarching goal is to minimize your tax liability as much as possible. While the clean vehicle credits offer potential savings, in many cases, they might not provide significant benefits. Always consult with your tax team before making major financial decisions to ensure you're maximizing your savings and making informed choices.

Navigating the intricacies of tax credits, especially the new clean vehicle credit, can be a daunting task. While the potential savings are enticing, it's essential to approach these credits with a clear understanding of their limitations and benefits. As solopreneurs, 1099 contractors, and small business owners, every financial decision can significantly impact your bottom line.

Remember the story of AJ? He was promised a substantial tax credit for his solar panels, only to find out he couldn't benefit from it due to his already reduced tax liability. Such situations underscore the importance of being well-informed and seeking expert advice before making major financial commitments.

Don't navigate these waters alone. Whether you're considering purchasing an electric vehicle, investing in solar panels, or exploring other tax-saving opportunities, let us be your guiding light.

  • Engage with Us: Share your thoughts and experiences in the comments below. Have you benefited from the clean vehicle credit? What challenges did you face?

  • Book a Consultation: If you're unsure about your eligibility or want to understand how the clean vehicle credit can benefit you, schedule an appointment with us. Our team is here to ensure you make the most of every tax-saving opportunity.

  • Stay Informed: Subscribe to our newsletter and follow us on our social media channels to stay updated on the latest tax news, tips, and insights tailored for you.

Remember, knowledge is power. Equip yourself with the right information, seek expert advice, and make financial decisions that propel you towards your goals.

blog author image

Neal McSpadden

Neal went from owing the IRS over $1,300,000 to Zero and in so doing discovered the world of tax planning. Since 2011 he's helped tens of thousands of clients save hundreds of millions of dollars on overpaid income taxes.

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Frequently Asked Questions


What's the difference between tax advisory and just filing my taxes?

Filing your taxes each year is a necessary task, but it is always backwards looking. Tax advisory works with you throughout the year to make sure that you are on the right track when it comes to your taxes and have strategies in place to save money now.


I've heard about tax write-offs for small businesses. What exactly can I write off, and how does it benefit my business?

Tax write-offs, also known as tax deductions, are expenses that a business incurs that can be subtracted from its revenue to reduce the amount of taxable income. Common write-offs include office supplies, mileage, rent for a business location, and advertising expenses, among many others. By writing off legitimate business expenses, you can significantly reduce your taxable income, which can lead to a lower tax bill. It's essential, however, to maintain proper records and ensure that the expenses are truly business-related.


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

A tax deduction reduces the amount of your income that is subject to taxation, which in turn can lower your tax liability. Common deductions include expenses like mortgage interest, student loan interest, and business expenses. A tax credit, on the other hand, is a direct reduction of your tax bill. This means if you owe $1,000 in taxes and have a $200 tax credit, your tax due would be reduced to $800. Some popular credits include the Child Tax Credit, the Earned Income Tax Credit, and credits for energy-efficient home improvements.


I'm thinking of hiring an independent contractor instead of an employee. Are there different tax implications for each?

Yes, there are significant tax differences between hiring an employee and an independent contractor. When you hire an employee, you're responsible for withholding federal and possibly state income taxes, Social Security, and Medicare taxes from their paychecks. You also typically pay unemployment taxes on wages paid to employees. Independent contractors, on the other hand, are responsible for their own taxes. As a business owner, you'd provide them with a Form 1099-NEC (if you pay them $600 or more during the year) instead of a W-2, and they would be responsible for their own self-employment taxes. It's important to correctly classify your workers, as misclassifying can lead to penalties.

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Disclaimer: The content presented on this website is intended for informational purposes only and is not tailored to the needs of any specific individual or entity. It should not be considered as financial, investment, or tax advice. The information provided is general in nature and does not account for individual circumstances or financial positions. Before making any financial or tax-related decisions, we strongly advise consulting with a qualified professional who can provide guidance tailored to your individual situation. All information on this site is provided in good faith, but we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the site. Use of this site and reliance on its content is solely at your own risk.



Contact Us


  • (678) 944-8367

  • 3900 CROWN RD SW STE 16709

  • Monday - Friday, 10:00 am - 5:00 pm

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