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Important note about the $7500 tax credit

Important note about the $7500 tax credit

With all the talk is about EV tax credit expiring soon, nobody has mentioned that many who may qualify will not even be able to use much of the tax credit (unless you're rich). The tax credit only reduces the tax you owe to the government. It is not refundable like the EITC or Child Tax Credit.

Bighorn | 15 april 2016

Really--no ones mentioned it?

carlk | 15 april 2016

Op is the first one to mention it in this thread.

EVino | 15 april 2016

You don't have to be rich to owe taxes. A dollar back is a dollar back.

vp09 | 15 april 2016

EV I think he means you have to be "rich" enough in taxable income to owe $7500 or more in the first place.

MarlonBrown | 15 april 2016

Stop with this "rich" concept. Many of us making $250k+ know how hard it is to pay taxes and other expenses.

jamilworm | 15 april 2016

Dude, a single person making around $55k per year will owe $7500. That's not rich.

Morlandoemtp061383 | 15 april 2016

Honestly if you don't make enough to have 7500 dollar in tax burden you shouldn't be buying the car unless someone is buying it for you. Not a wise purchase to buy a vehicle that optioned will cost around 40k if for example you make 30k.

martinmitchell | 15 april 2016

One also has to retain the car for three years, if not, you have to pay the $7500 back.
Excluding the car getting totaled...

carlk | 16 april 2016

Never heard of that 3 year ownership requirement. Did you make that up?

PaceyWhitter | 16 april 2016

Unless you are retired you will have 7500 in tax liability. That does not mean you pay 7500 to the government in April, it means you had that much, or more, withheld from your paycheck if you're working. Also, there is no three year requirement. Many have bought an S and then traded in for another S within that time and received two tax credits.

Bighorn | 16 april 2016

@martin
Not true

SCCRENDO | 16 april 2016

@Bighorn and Calk. I believe the 3 year requirement is in the regulations. I remember seeing it. I think it was also on the Tesla website. Don't have time to check. The big question is how well it is enforced.

Bighorn | 16 april 2016

@SCCR
I thought that related to the CA rebate program.

TeslaTap.com | 16 april 2016

Read the rules - https://www.irs.gov/Businesses/Plug-In-Electric-Vehicle-Credit-IRC-30-an...

Requirements to get the full credit:
1) An EV with enough battery capacity (all Teslas, including the Model 3 meet this).
2) A tax liability to offset the credit
3) Vehicle is not for resale (no time limit stated).
4) Car is intended primarily for driving on US roads.
5) The vehicle manufacturer hasn't sold more than 200,000 vehicles IN THE USA (outside USA sales do not count). After 200,000 sales the credit diminishes. Due to the way the law was written, it is possible for Tesla to have more than 200,000 USA vehicles qualify for the full credit - perhaps as many as 250,000. It just depends if the threshold is exceeded early in a quarter and how fast the ramp up is.

Bighorn | 16 april 2016

Thanks TT.

jamilworm | 16 april 2016

Part of the California rebate states "Retain ownership of the vehicle in California for a minimum of 30 consecutive months immediately after the vehicle purchase or lease date. "

SCCRENDO | 16 april 2016

@bighorn. Told you I didn't have time to check. Thanks for the info. Passed the 3 year mark so I guess I get to keep my Califorrnia rebate.

melinda.v | 16 april 2016

@PaceyWhitter there are a lot of middle class individuals (and all lower income) that have less than $7500 tax liability. Based on 2015 tax, a single individual's taxable income hits $7,500 at $46,800. So add the $4,000 standard deduction you are at a salary of $50,800. And that's without any itemized deductions.
One could easily make $75,000 and barely hit the $7,500 tax once itemized.

warren_tran | 16 april 2016

There is any easy way to get more tax liability. Just claim more dependent then you will get a bigger tax liability when you file tax.

Although I do not have that problem but I don't like Uncle Sam borrow my money upfront.

Bighorn | 16 april 2016

@warren
Claimed dependents (W-2) only affect withholding, not tax liability.

warren_tran | 16 april 2016

Bighorn,

You are right. I guess I'm been trying to lessen my tax liability since I had to pay back tax so I got it mixed up.

Either way, I rather pay tax when I file then get a refund since I can use the money during the year for investment purpose.

Bighorn | 16 april 2016

@warren
That makes sense, but the tax credit is a separate issue. It offsets the entire tax burden, not just what is owed come April.

Morlandoemtp061383 | 16 april 2016

Easiest way to get more tax liability is to put 5500 in an traditional ira, every year and then convert it to a Roth IRA the year you accept delivery on your tesla.

Haggy | 17 april 2016

If you have appreciated securities with unrealized gains, you can sell them and then buy them back. There's no such thing as a reverse wash sale rule. You become subject to the capital gains tax and the cost basis shifts. If you sell enough securities to fill in the difference between your total expected tax liability and $7500, you end up with the same taxes either way, but down the road you save taxes because you have a higher cost basis.

tesla | 17 april 2016

Morlandoemtp061383 said: Easiest way to get more tax liability is to put 5500 in an traditional ira, every year and then convert it to a Roth IRA the year you accept delivery on your tesla.

That is brilliant. You deserve to drive a Tesla because you think outside the box.

dtodd16 | 17 april 2016

Actually, in order to get the full credit, you need to owe $7500 in tax after all deductions are taken like college credit, child credit, etc. Also, self employment tax does not apply. Any amount of the $7500 that you can't take is not transferable to next year. Beware.

Spurzfan20 | 18 april 2016

I made about $60,000 last year, am single, and had no write offs and got back about $25. So, if I had bought a Tesla, does that mean I would not have received any of the $7500 tax credit? If so, I really need to change my taxes in 2 years. Maybe have no taxes taken out for about half the year.

Bighorn | 18 april 2016

@Spurzfan
It's based on your actual tax, not what's due after withholding or estimated payments. I suspect you paid at least $7500 in withholding and you would get that back as a refund.

jamilworm | 18 april 2016

Spurzfan20, it doesn't matter how much you owed at the end of the year because you presumably were paying income tax throughout the year with money taken directly out of your paycheck. So if you look at your federal income tax withheld on your W2 if that was over $7500 then you'd get that amount back at teh end of the year because of the rebate. If you had less than that withheld and you didn't owe any more at the end of the year then you'd get the rebate of whatever you actually did pay.

genedr @ny-us | 18 april 2016

I think I wandered into the H&R Block forum. Pardon me, I was looking for a TM3 forum.

Haggy | 18 april 2016

It doesn't matter how much you got back. If you had $7525 in payroll deductions over the course of a year, and got back $25, it means that you would have gotten back $7525 had you bought a Tesla.

SCCRENDO | 18 april 2016

@genedr. Don't be such a a**hole. These are real concerns of people wishing to buy the Model 3. It may be make or break for them. I am an early adopter who has 86000 plus miles on a Model S. Vin 77xx. Have put down a deposit on a Model 3 and am debating whether to pu down a deposit on a second on. I'm happy to give my 2c worth to prospective owners. If you are no it interested tune out and look at other topics that may interest you

Spurzfan20 | 18 april 2016

Thanks for the help!