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Potential Remedy for Expiring Tax Credit

Potential Remedy for Expiring Tax Credit

The tax credit for Tesla vehicles is down to $1875 and will expire in a month. Meanwhile, many competitors will be coming on the market with a full $7500 tax credit, putting Tesla at a great disadvantage. I've long wondered why Tesla doesn't leverage their solar power equipment sales and the associated 30% tax credit to help vehicle sales. Tesla Powerwalls qualify for the 30% credit, and what is a Model S, X, or 3 but several Powerwalls disguised as transportation? If Tesla offered a relatively inexpensive inverter and gateway from the car to one's home electric system, wouldn't at least the battery portion of the car qualify for a 30% credit?

Advantages for the buyer include home power backup, cheaper electricity from solar power, solar charging of the car, and a potential $14k tax credit. Advantages for Tesla include greater solar sales, profit on the inverter/gateway, and, of course, more vehicle sales and a competitive advantage. There are arguable "gotchas" with respect to this suggestion, but I don't think they come even close to negating the benefits. For more details on this idea, please see http://PriUPS.com/RIKLblog/nov19/191128-tesla-tax-troubles.htm

I'm really curious as to why Tesla hasn't offered this long ago.

Richard

andy.connor.e | December 3, 2019

If the only thing people care about is the price tag, then it doesnt matter. If $7500 in tax credits is what separates someone in that kind of tax liability category to buy an objectively inferior vehicle then i dont think it matters for that person. Theres nothing you can do. The best car ever is not going to be the cheapest car.

TeslaTap.com | December 3, 2019

@rfactor - I'm not an accountant, but I'm about 90% sure the battery has to be physically installed in the house at the same time as the solar is added to get the credit. I doubt the car would qualify unless permanently installed in some strange way.

Tesla's costs are already well below the competition, allowing Tesla to still be competitive without the tax credit.

jimglas | December 3, 2019

I don't think batterie back up qualifies for the tax credit, only the panels.

rfactor | December 3, 2019

I'm not an accountant, either. Otherwise I'd still be driving a 14-year-old Prius! Maybe there is someone here who can speak to this. Does it need to be "permanently installed" or is "most of the time" good enough? Anyone know the actual details or requirements?

Richard

andy.connor.e | December 3, 2019

I have a reservation for the solar roof and i've looked into what @jimglas said.

Powerwall installation alone does not qualify for the tax credit, but if you install solar and powerwall together, the powerwall is included in the tax rebate. Solar by default qualifies for the tax incentive.

jrweiss98020 | December 3, 2019

Batteries only qualify for the credit if they are charged exclusively by the solar panels.

jimglas | December 3, 2019

sorry
Guess I was given some bad info by my installer
Maybe I would have ot battery back up if I had the right info

rfactor | December 4, 2019

jrweiss98020: Do you have any more details on the charging requirement? For example:

1: If your solar system delivers an average of, say 50kWh per day, and your car, on average, uses less than that, you could argue that your car receives all its charge from solar. Yes, perhaps it's somewhat roundabout, but even so...

2: If you charge the car directly from solar power and only use solar for other purposes once the car is charged, does that count?

Etc. I can imagine several more scenarios, but authoritative details are hard to come by. Maybe the rules were written before there were this many possibilities.

Richard

andy.connor.e | December 4, 2019

Heres the link to the website that has a document explaining the tax credits and what qualifies.

https://www.irs.gov/pub/irs-pdf/i5695.pdf

rfactor | December 4, 2019

The three-page IRS form andy.connor.e linked to has only has one paragraph about "Qualified solar electric property costs" and a single sentence about when you can realize the "costs."

"Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home doesn't have to be your main home."

and

"...For purposes of the credit, costs are treated as being paid when the original installation of the item is completed."

I am not a lawyer or accountant (insert comment of your choice here) and perhaps decades of counting angels on pinheads gives those professionals insight into the meaning of really short words. To me, use and item are ambivalent. Item would seem to refer to the solar system or any part thereof. For example, if you add Powerwalls to a solar system, they qualify for the credit even if they're installed in a different year from the solar panels. Likewise, use to me implies that a car, clearly property, if charged from solar power and then discharged back to the house, whether routinely (for peak cost saving) or episodically (for backup) would make it indistinguishable from Powerwalls in terms of function. (Apologies for the length of that sentence. I will have it taken out and shot if this issue is resolved.) I don't see anything in the IRS document that mandates that the car can't, from time to time, be disconnected and driven.

I don't claim that mine is the definitive interpretation. Reading the IRS form restrictively, one might interpret it to mean that only the original installation deserves the credit and later additions don't. Reading it liberally—look at the part about structural components—and you could argue that the whole car, not just the batteries, deserve the tax credit.

Finally, although the tax credit would be an enormous boon for both Tesla and their customers, it's not the only boon! Using the car for utility backup and/or cost reduction are worthwhile in themselves.

andy.connor.e | December 4, 2019

When you go to order a powerwall only, there is no tax incentive. When you go to order solar panels or solar roof, there is a tax incentive. When you add powerwalls to that order, the tax incentive increases. Teslas order screen says that powerwalls with solar is quantifiable. Powerwall only order screen does not show this.

Solar: https://imgur.com/a/yjBZGN0
Powerwall: https://imgur.com/a/0ObD2mP

rfactor | December 4, 2019

Thanks. The energy-storage-tax link is especially interesting. Although, they do say: "...we are solar experts, not tax experts! Tax codes are complicated, so consult your tax advisor before deciding what is best for you."

Everything I've been suggesting requires solar power, not grid charging. The ambiguous part is whether a vehicle can be treated similarly to a Powerwall for tax purposes.

Also, as I asked above: "If your solar system delivers an average of, say 50kWh per day, and your car, on average, uses less than that, you could argue that your car receives all its charge from solar. Yes, perhaps it's somewhat roundabout, but even so..."

It would be good to have an answer to that, too, since a "Yes" would imply that anyone with enough solar power could buy a Tesla and get the tax credit. Otherwise, presumably, the car would have to be charged directly from the solar panels, a technically meaningless distinction but one perhaps fraught with tax consequences.
Nice can'o'worms, no?

Ricihard

andy.connor.e | December 4, 2019

"Everything I've been suggesting requires solar power, not grid charging. The ambiguous part is whether a vehicle can be treated similarly to a Powerwall for tax purposes."

I doubt it. The powerwall does not get disconnected from your system.

nightforge | December 6, 2019

Since just updated shuffle of production time here's an idea: Include self-driving if single motor folks upgrade to a duel motor? 2K more then single motor with self driving pre-order +2k.more. Still get truck when originally expected and upgraded. Would take the extra year of waiting sting off a bit! Thanks, still very excited.

andy.connor.e | December 6, 2019

Put the motors up in a duel.