$7500 federal EV credit not allowed for business

[teethdood]

I apologize if this has been asked before, but my search of the forums is still pretty unclear.

My MX is used 97% for S-Corp business. I am able to deduct the personal 3% which is $225 with no issues. The business portion of $7275 is disallowed for some reason, but is to be carried forward for maximum 20 years. Can anyone tell me why that is? And with the expiration of the full EV credit, will I lose it? (doubtful because it's already in my tax form as a credit, but just asking to be sure.)

Thank you

 

[Tam]

...The business portion of $7275 is disallowed for some reason...

Who disallowed that business credit? There's a thread confusion about the $2,500 (2 wheels) VS $7,500 (4 wheels) for business but nothing about disallowance:

Business purchase and the $7500 FEDERAL tax credit

 

[teethdood]

@Tam thanks for the link.

According to post #7 on that link, I'm disallowed because of AMT, so it'll get carried year to year for 20 years and will be deducted if I don't get hit with AMT. Tough pill to swallow as I've always been hit with AMT.

 

[Brando]

Hummer tax credit - much better

Can you help with purchasing a Tesla as a business vehicle?

 

[ewoodrick]

It sounds as if you are mixing different tax programs. The $7500 tax credit should be readily available, banks are even allowed to use it when they lease a vehicle.
I do not believe that the $7500 is allowed to be split, like business/personal use of vehicle, that's based on cost, and the tax credit should occur before then.

 

[teethdood]

I just found another thread on this subject:
EV $7500 Federal Credit - Alternate Minimum tax

Next to last post was pretty clear on this point. While the personal portion is not limited by AMT and so can be deducted as long as you owe taxes, the business portion is different and is subject to AMT. I guess I'm SOL with my current MX and my ordered 2nd MX as well. I wish I had known. Hopefully others will take this into account when ordering their EV for business purposes.

 

[testarossa]

Leasing is always a better option as an S-Corp owner IMHO. Even if you take advantage of the section 179, unless you own the car for 5 years or trade for another vehicle which qualifies, you're liable to having to pay part of the credit back on subsequent returns.

 

[cpa]

You are correct. General Business Credits are subject to limitations in order to be claimed on individual returns. AMT is one limitation. Taxable income generated by the business is another. This law was ginned up (if I recall correctly) as a direct result of the '86 Act. Long story why.

The new tax law has relaxed the AMT hit for many taxpayers, so there might be a glimmer of hope for you in 2018 and beyond. It might dribble into your return over a couple of years, so be patient!

The dubious silver lining in all this is that Section 196 (again, if I recall correctly) permits the taxpayer to take a deduction of any unused general business credit in year 21, i.e., after the credit has expired. This assumes, of course, that the taxpayer properly reduced the depreciable basis of the asset when he originally claimed the credit 21 years earlier.

Businesses cannot claim a depreciation deduction and a tax credit on the same amount (in this case, $7,500). No double-dipping.

 

[Uncle Paul]

You can claim what ever you wish. It them becomes up to the IRS to accept or reject that claim.

 

[teethdood]

@cpa I made sure to subtract the federal credit $7500 from the purchase price. The state rebate (in my case CA $2500) is not considered a credit but is considered income so that gets added to my income amount. Just clarifying. Thanks.

 

[cpa]

You can claim what ever you wish. It them becomes up to the IRS to accept or reject that claim.

UnclePaul, your suggestion raises more questions than it answers. There is no provision for filing a tax return claiming what ever one feels like, and then playing audit roulette to see if it flies.

Considering that the IRS is woefully understaffed and underfunded, the chances of blatantly false tax returns making their way through the system unchallenged are quite good for the taxpayer. But that still is no justification for the old baseball adage that says, "If ya ain't cheatin'; ya ain't tryin'."