Federal Tax Credit Questions

Federal Tax Credit Questions

I have some questions regarding the $7500 federal tax credit for the Tesla Model S.

Q1: I currently pay over $1,000/month in federal taxes. Would I be able to claim the full $7500 credit?

Q2: I've heard that Alliant Credit Union will count the $7500 tax credit toward the down payment on a new Tesla Model S. Is this true?

Q3: I believe I recall a Tesla rep saying that inventory vehicles (not buyback) are applicable for the $7,500 tax credit since they have not been titled. Is this true?

Q4: As a follow-up to Q2, if Alliant credits the $7500 toward the down payment on a new Tesla Model S, will they do the same for a used inventory car that has not been titled?


sberman | August 3, 2014

Q1: Yes. The amount of the credit has nothing to do with how much tax you do/do not pay.

Q2: This is an Alliant question. I have no idea.

Q3: I believe this is correct. Check IRS Form 8936 for complete clarification.

Q4: Also Alliant ... I have no idea.

1BadNerd | August 3, 2014

Regarding Q1, what you pay per month may not matter. Even if that is not withholding, but 'actual' taxes (whatever that means before April 15), you may have exemptions, deductions and other tax credits. When you submit your 1040* next year, you can apply the credit against what you owe. You should, of course, plan this out with your accountant or tax preparer.

Mathew98 | August 3, 2014

1) Y
2) N
3) Y
4) N/A

Mathew98 | August 3, 2014

Must file AMT as well to claim fed credit.

sberman | August 3, 2014

I disagree with Mathew98's assertion that everyone who claims the Model S Federal Tax credit must file an Alternative Minimum Tax form as well.

Check with your tax advisor.

Exsedol | August 3, 2014

@Mathew98 - on the page, this text appears on the right under the EV Incentives subheader:

"Electric vehicle incentives range from $7,500 to $15,000 depending on your state and offset your down payment."

Wouldn't the $7,500 offset the down payment when financing through Alliant Credit Union?

Bighorn | August 3, 2014

If your $1000/mo withholding includes FICA and state income tax and/or your W4 results in excess withholding, it's possible that you won't have a 7500 federal income tax burden to be offset by the credit. I find it unlikely that a credit union would apply the credit to your down payment.

kwoo4424 | August 3, 2014

I went through Alliant. You pay the full down payment, then get Federal tax credit back in April ; It offsets your tax liability which may include AMT if you have it.
I went with Alliant because they had the best rate.

Mathew98 | August 3, 2014

You won't get fed credit until you file the return at the beginning of next year. The checks goes to you, not ACU. Call ACU to verify.

A lease with Tesla directly may count the fed credit against the lease term. It won't fly against ACU or any other lenders.

My tax refund was $7,500 less than than what my return was filed. There were no rhythms or reasons for the obvious fed credit rejection. I did not owe AMT so it wasn't filed. However, after looking up and down several sites, I amended my return with AMT filings and I received a second refund check for $7,548. Oh yeah, that included the interest.

Pungoteague_Dave | August 4, 2014

You can also get the credit right now by reducing your federal withholding tax immediately (file a new W-4 with your employer claiming more exemptions sufficient to offset the tax credit). Many people overpay their taxes - you can manage your liability and withholdings to get very close and have only a small refund, or small amount due. Anyone receiving a large refund from the government, or waiting to receive their EV tax credit until April, is providing an interest-free loan to the government for no good reason. However, be careful - AMT can screw up the credit if the car is used in business. We received zero tax credit for our '13 MS due to large paper losses that generated an NOL for the year. Note also that the credit cannot be used to offset payroll or self-employment taxes. We owed significant taxes on our 1040 last year, but did not get a penny of EV credit.

rogerball88 | August 4, 2014

It is my understanding that you MAY get a federal tax credit of UP TO $7500. If your total federal income tax liability for the year is $7500 or more, then you will get a total credit of $7500. If your total federal income tax liability for the year is less than $7500, then you will get a tax credit of that lesser amount. And I am talking about actual total federal taxes paid for the year, NOT just what you may owe in taxes when you file your tax return. If your tax bill for the whole year is zero, then you will not get this tax credit at all. It is not what is referred to as a "refundable" tax credit.

johncrab | August 4, 2014

The way my CPA explained this to me, it's a credit which has to be massaged a bit differently in the forms but it basically comes off the total tax liability, regardless of how that is calculated. If you have other credits and cannot use all of it, the balance can be carried forward into subsequent tax years (unless Congress makes another retroactive change to the tax laws). So after all is said and done with the forms, if you owe $10k, you suddenly only owe $2500 thanks to the credit.

This is separate form any 4562 depreciation on the car if used in business. This is a personal credit, not a business credit. OTOH, S-Corps (so I'm told) don't qualify for the credit because it is only available to individual and joint filers, not business filers, unless sole proprietorship, Schedule C and all that.

Best advice is to let your accountant run his/her meter a bit and have a chat so you know all about your own situation as you go into it. | August 4, 2014

Its a credit against your tax liability, up to $7500. If you owe less than $7500 in taxes, you lose the rest, it does not rollover. You also get a tax credit on the HPWC, but I believe you lose that if you owe AMT.


johncrab | August 4, 2014

My last Prius credit did rollover but all of this changes seemingly from day to day. I'll be able to use mine this year, so no worries but the best advice is to talk to your CPA before making any big purchase so you can be in the best position at the end of the tax year.

MMHouston | August 4, 2014

If I could afford a Tesla but had a less than $7,500 tax liability, I think I'd be just fine losing some of the credit.

Mathew98 | August 4, 2014

@MMH- Convert some of your IRA to Roth IRA and incur tax liability to claim your $7500 credit. In essence getting a tax free conversion.

DTW_Tom | August 4, 2014

hey Folks, as a CPA , the March 29, 2013 thread below is absolutely correct. Its by steven maifert

1) The credit is taken in the tax year you put the car in service. For most folks, that's the day they take delivery.
2) The credit is used to offset what you owe in Federal Income tax.
3) It is a non-refundable credit that must be taken in the tax year you put the car in service and cannot be carried forward or backward to other tax years. To get the credit, you have to owe tax. It's not income dependent. The credit is used to offset up to $7500 in taxes you owe. If you owe less than $7500, they don't refund you the difference.
4) AFAIK, you cannot split the credit between two owners, although if the two owners are spouses, the credit can be applied to a joint tax return.

ir | August 4, 2014

Q2: I think you are confused between LEASING and FINANCING.

The $7,500 credit goes to the FIRST OWNER of the car.

When you FINANCE (or buy with cash), you are the first owner and are eligible for the $7,500 Federal Tax Credit.

When you LEASE, the bank / credit union is the first owner. So they can claim the $7,500 and YOU CANNOT! If you don't say anything, then they get free $7,500 at your expense. If you speak-up, you can negotiate a $7,500 discount from your LEASE, so that the savings can be passed-down to you.

Brian H | August 5, 2014

Thought only persons could qualify.? I doubt the bank files a personal tax return. | August 5, 2014

@Brian H - Corporations are people too :-)

Brian H | August 6, 2014

Not generally in tax law.