$7,500 Tax Credit Question

[Brandon332]

Hi all,

Does anybody know if I can add my mom to our Model X registration and allow her to take the $7500 credit? We both live in the same house, and I expect to have very little tax liability. She however will have almost the entire $7500 worth of liability. Can it work this way? Thanks so much!

 

[Tam]

...registration..

I am not a tax person but I think she must own your car as original new owner(s). It's the title for ownership. Registration for putting the car in service on which tax year.

 

[ChrisJ]

One suggestion for those with very little tax liability is to use it to convert part or all of an IRA to a ROTH IRA. Unfortunately, you would have had to do it in the same tax year you bought the car - but worth checking if you can do it retroactively.

 

[gearchruncher]

Just to be sure you understand- your liability is NOT the check you write at the end of the year. It's total tax owed for that year. You could be getting a $20K refund and this would increase it to $27,500.

I realize there's lots of tax situations, but it's pretty rare that someone buys a 70K+ Tesla and has less than about $50K in income.

Agreed that the issue is the Title, not the registration.

Instructions for Form 8936 say:

The following requirements must be met to qualify for the credit.

• You are the owner of the vehicle.
• If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
• You placed the vehicle in service during your tax year.
• The vehicle is manufactured primarily for use on public streets, roads, and highways.
• The original use of the vehicle began with you.
• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States.

I think you're caught by "The original use of the vehicle began with you." if you want your mom to take it.

 

[PedanticOne]

As far as I know, you cannot get the credit as a refund. It can only reduce your tax liability.

But regardless, you should be talking to your tax preparer, not the forums (generally speaking). Just. In. Case.

 

[HankLloydRight]

I am not a tax professional, but I think if you're both listed on the title, she can claim the credit.

The form just asks for the VIN. The IRS is not doing any cross-matching to compare the name on the tax return to the name on the title. The only issue would be if your mother gets audited, and they ask for proof -- and you give them the title with her name on it, I don't think they can claim she doesn't own the car.

I think you're caught by "The original use of the vehicle began with you." if you want your mom to take it.

I think this means that you don't qualify if you are the 2nd (or later) owner. The emphasis is on "original" not "you". If they are both owners and live in the same house, they both can be using the car. If your mother is the first one to drive it off the lot, I think that would qualify as "original use".

But again, I'm not a tax pro. Just my opinion.

 

[daniel]

Hi all,

Does anybody know if I can add my mom to our Model X registration and allow her to take the $7500 credit? We both live in the same house, and I expect to have very little tax liability. She however will have almost the entire $7500 worth of liability. Can it work this way? Thanks so much!

A surprisingly good source of information on questions like this is the IRS itself. I have found them to be courteous and friendly. You can ask them any tax question. 800-829-1040. You can give them your personal information and ask about your own taxes, or you can phrase the question as a hypothetical without giving your personal information.

My own guess is that only the original owner can take the tax credit. But I am not a tax professional.

 

[gearchruncher]

As far as I know, you cannot get the credit as a refund. It can only reduce your tax liability.

You can absolutely get the credit as a refund. The credit cannot reduce your tax liability below zero. However, your tax liability is not what you pay in April. It's the total you owe to the IRS for that tax year, regardless if you over or under withheld. The credit is not available only to people that under-withhold by $7,500 or more. In fact, you owe a penalty if you owe the IRS more than $1,000, so that would be kind of mean.

Check your paystubs and look for "federal tax withheld year to date". If that's more than $10,000 on your last paystub for the year, there's a good chance you are eligible for the full credit.

The form just asks for the VIN. The IRS is not doing any cross-matching to compare the name on the tax return to the name on the title. The only issue would be if your mother gets audited, and they ask for proof -- and you give them the title with her name on it, I don't think they can claim she doesn't own the car.

Agree this is all about an audit. However, it's also about a car that already exists, not one being delivered in the future. So the audit goes like this:

IRS: Show me the title to this Tesla Model X you own
Mom: Here.
IRS: This title dated in 2017? You're claiming credit in 2016.
Mom: Well, we added my name to the title in 2017 so we got a new title after the original one.
IRS. So you weren't on the original title? Well, that's OK. Show me the documents showing it was put in service in 2016 by you.
Mom: Well, I need to get those from my son. (goes and gets) Here they are.
IRS: How come your name isn't on any of the original documents?
Mom: Well, I wasn't planning on having any ownership of this car when my son bought it.
IRS: Well, We'll give you a second pass. It's your car, you drive it all the time, right?
Mom: Well, actually, my son drives it pretty much all the time. It's really his car.
IRS: Well, that's OK, you must have gifted it to him. When you bought it, you drove it home, right?
Mom: Well, he bought it with his own money and drove it home....
IRS: So in what way is this car owned by you, placed into service in 2016 by you, and the use originally started with you?

I don't think this is going to fly. But I don't think it's needed because basically zero people that bought a Tesla as a non-business vehicle have income so low that they have less than $7,500 in tax liability. How did you get $70,000 or $1,500 a month into your bank account without having the income?

 

[deonb]

One suggestion for those with very little tax liability is to use it to convert part or all of an IRA to a ROTH IRA.

Has someone actually done this successfully?

I've heard about it, but it doesn't seem to work based on the 1040 layout (the $7500 credit is taken before the IRA distribution is added).

 

[HankLloydRight]

I don't think this is going to fly.

It was not clear to me if the OP's question was before title/registration, or after.

If after (i.e. changing the title retroactively) then yes, I agree with you.

I assumed the question was posed to be before delivery/title/registration.

 

[Brandon332]

I saved up some money, old fashioned saving.

 

[HankLloydRight]

But I don't think it's needed because basically zero people that bought a Tesla as a non-business vehicle have income so low that they have less than $7,500 in tax liability. How did you get $70,000 or $1,500 a month into your bank account without having the income?

Didn't Mitt Romney claim that he had no income, and therefore little/no income taxes? You're telling me he couldn't buy a Tesla?

Just because someone doesn't have $7500 in tax liability doesn't mean they can't afford a Tesla. The two are only very loosely related.

 

[SageBrush]

The two are only very loosely related.

Tightly related for people buying the car from current and future salary, and in the US that appears to be the large majority.

 

[gearchruncher]

Didn't Mitt Romney claim that he had no income, and therefore little/no income taxes?

Mitt Romney paid very little tax for his income, but still paid $2M in the years before the campaign. The issue with the very rich is rarely paying literally zero (the AMT takes care of that) but just paying a very low percentage.

 

[gearchruncher]

It was not clear to me if the OP's question was before title/registration, or after.

It's right in his sig:

75D confirmed 02-04-16, delivered 7-8-16, Massachusetts VIN 880X.

 

[HankLloydRight]

I didn't see the sig on my phone.

In that case, yeah, I'd retract what I posted and say that claiming the credit now would be very "iffy".

 

[PedanticOne]

You can absolutely get the credit as a refund. The credit cannot reduce your tax liability below zero.

Makes sense. Thanks!

 

[daniel]

...
The form just asks for the VIN. The IRS is not doing any cross-matching to compare the name on the tax return to the name on the title. The only issue would be if your mother gets audited...

You can get away with anything if you don't get audited. You can make up a VIN and claim you bought a car that does not exist, and if you don't get audited you're golden. But tax fraud carries some pretty nasty penalties. I'd say it's not worth it. You might say it's not really fraud if you believe what you're doing is permitted, and the IRS might agree and let you pay back the difference. Or they might get unfriendly. Check with the IRS before you ask your mom to claim the tax break on a car you bought for yourself. Now, if she buys the car and gives it to you, you're probably okay. But still, check with the IRS. They're really very friendly, unless they think you're trying to pull a fast one on them. Asking them "Is it okay to do X?" will never get you in trouble, unless they say "No" and you do it anyway.

 

[HankLloydRight]

You can get away with anything if you don't get audited. You can make up a VIN and claim you bought a car that does not exist, and if you don't get audited you're golden. But tax fraud carries some pretty nasty penalties

Nothing I suggested was tax fraud. I didn't suggest "trying to get away with it". I was just stating that the IRS doesn't cross check the EV form with the names on the titles of the VINs submitted.

But they do check the VINs to be valid EVs/hybrids and also check that the VINs haven't been claimed already. So no, you can't just "make up a VIN" for a car that doesn't exist -- which clearly IS tax fraud.

The only thing I suggested was that if the name on the IRS form matched ONE name on the title (and you're the first owner and it wasn't after the fact) that that seems to be a valid condition of claiming the tax credit.

 

[BluestarE3]

Has someone actually done this successfully?

I've heard about it, but it doesn't seem to work based on the 1040 layout (the $7500 credit is taken before the IRA distribution is added).

IRA distributions are entered as income in Form 1040 line 15 (total conversion amount in 15a; taxable portion in 15b). Form 8936 uses the amount in Form 1040 line 47 to calculate your credit. The resulting credit amount is entered into Form 1040 line 54.