Advice Needed on Selling... Tax Credit

[kgerrard]

Hi Guys! I am in need of some advice here.

So I finally got my 3! And it's cool but I really miss my S and want to go back to the bigger car.

Now I'm not sure exactly how the tax credit works... but being in Utah I haven't registered the car yet. The Tesla Temp Tags last 90 days. So should I try and sell the car now? And hopefully someone else can take the credit if THEY register it?

Or will that not work... in which case I will register it and keep it for awhile, take the credit, then get the S.

Any advice is appreciated.

 

[ℬête Noire]

Hi Guys! I am in need of some advice here.

So I finally got my 3! And it's cool but I really miss my S and want to go back to the bigger car.

Now I'm not sure exactly how the tax credit works... but being in Utah I haven't registered the car yet. The Tesla Temp Tags last 90 days. So should I try and sell the car now? And hopefully someone else can take the credit if THEY register it?

Or will that not work... in which case I will register it and keep it for awhile, take the credit, then get the S.

Any advice is appreciated.

As always, consult your/an account however in layman opinion; You already have the vehicle in operation, what the IRS is technically is concerned about (not the registration). It was bought without intention to resell. It's you, and only you, that'll be able to claim the tax credit. Put it your 2018 taxes, filling with it the necessary 8936 form. It'll factor into the resale price you'll be able to get and that's that.

Good luck.

 

[kgerrard]

Oh really? You think without registration the tax credit could still be taken advantage of?

 

[gregincal]

It has been registered. The "Tesla temp tags" are California registration tags. You can't drive a car before it's registered with some state, and the federal government isn't going to care which state the car was registered in.

 

[Glamisduner]

You best bet is probably to wait until the federal tax credit has been phased out. Otherwise your going to have to take a serious loss, because who is going to buy it from you for near full price, when they can buy their own and get a 10k tax credit?

 

[kgerrard]

It has been registered. The "Tesla temp tags" are California registration tags. You can't drive a car before it's registered with some state, and the federal government isn't going to care which state the car was registered in.

The IRS considers a vehicle acquired when "Title has transferred to taxpayer under state law". I'm not sure if it applies before registration. I'll have to do some digging.

 

[gregincal]

The IRS considers a vehicle acquired when "Title has transferred to taxpayer under state law". I'm not sure if it applies before registration. I'll have to do some digging.

Title was indeed transferred to you under California state law. Again, the federal government doesn't care what state you're talking about.

 

[HeloCaptain]

Buy the S and take two credits (if your tax situation permits that amount of credit).

I purchased an S in early 17 and traded it in for an X in late 17. Received both tax credits = $15000. total.

You don't have to keep the car for any specific time to claim the credit.

Comments relate ONLY to federal tax credits.

 

[ItsNotAboutTheMoney]

26 U.S. Code § 30D - New qualified plug-in electric drive motor vehicles

(d) New qualified plug-in electric drive motor vehicleFor purposes of this section—
(1) In general The term “new qualified plug-in electric drive motor vehicle” means a motor vehicle—
(A) the original use of which commences with the taxpayer,
(B) which is acquired for use or lease by the taxpayer and not for resale,
(C) which is made by a manufacturer,
(D) which is treated as a motor vehicle for purposes of title II of the Clean Air Act,
(E) which has a grossvehicle weight rating of less than 14,000 pounds, and
(F) which is propelled to a significant extent by an electric motor which draws electricity from a battery which—
(i) has a capacity of not less than 4 kilowatt hours, and
(ii) is capable of being recharged from an external source of electricity.

If you sold the vehicle to somebody, then for them it would be
(A) No
... and so they wouldn't be able to claim.

For you it's
(A) Yes
(B) ?
(C) Yes
(D) Yes
(E) Yes
(F) Yes

As long as you satisfy (B) you can claim the tax credit when you file your 2018 taxes (unless the law changes).
If you buy a new Model S, then you'd be OK _also_ to claim the tax credit for that, but note that the credit is non-refundable, so you'd need $15,000 of tax liability less other credit fully to claim for both vehicles.

 

[Msjulie]

Put it your 2018 taxes, filling with it the necessary 8936 form. It'll factor into the resale price you'll be able to get and that's that.

I know this is the common belief, that selling a used Tesla (or any car) where you got the tax credit and new buyer can not and thus the car is worth less is 'truth', it is not what I have seen.

Some buyers will expect you to price accordingly and they won't be your buyer necessarily. Have a look at cars.com, cargurus, carmax etc - the fact a car had a tax break for the original buyer is rarely (never?) reflected in the sale price - or to protect my backside from negative feedback - that I have observed.

On that note, I recently sold my 3 to get a Performance 3 and though I never thought to ask some of the prices folks are asking for turnaround-model 3s, the price I got did not reflect the fact that I still got/get the tax credit for original purchase. In other words, I thought I got a completely fair price for my car and there was not tax-break penalty for me...

 

[Raechris]

+1 and car in service which happened when you drove it away
Assume you purchased and did not lease, otherwise lease company gets the credit

 

[Msjulie]

I know this is the common belief, that selling a used Tesla (or any car) where you got the tax credit and new buyer can not and thus the car is worth less is 'truth', it is not what I have seen.

Just to justify myself further Tesla doesn't reduce the price for you if the tax credit doesn't apply to you and I'd be bum-shocked if the price goes down incrementally next year as the credit phases out...

I totally get it that if you qualify for the tax then the additional price of new vs pre-owned is a clear advantage to you as a buyer.. but it's not a given for valuation of a given car itself, just perhaps in a given transaction

 

[rweggert]

Hi Guys! I am in need of some advice here.

So I finally got my 3! And it's cool but I really miss my S and want to go back to the bigger car.

Now I'm not sure exactly how the tax credit works... but being in Utah I haven't registered the car yet. The Tesla Temp Tags last 90 days. So should I try and sell the car now? And hopefully someone else can take the credit if THEY register it?

Or will that not work... in which case I will register it and keep it for awhile, take the credit, then get the S.

Any advice is appreciated.

Take the tax credit yourself and then give the new buyer an additional discount of up to the $7,500. You might make yourself a small profit.

 

[Glamisduner]

I know this is the common belief, that selling a used Tesla (or any car) where you got the tax credit and new buyer can not and thus the car is worth less is 'truth', it is not what I have seen.

Some buyers will expect you to price accordingly and they won't be your buyer necessarily. Have a look at cars.com, cargurus, carmax etc - the fact a car had a tax break for the original buyer is rarely (never?) reflected in the sale price - or to protect my backside from negative feedback - that I have observed.

On that note, I recently sold my 3 to get a Performance 3 and though I never thought to ask some of the prices folks are asking for turnaround-model 3s, the price I got did not reflect the fact that I still got/get the tax credit for original purchase. In other words, I thought I got a completely fair price for my car and there was not tax-break penalty for me...

It sure has affected volt resale value or other cars that are readily available. 3's are still hard to get so I think that helped you out, but production rampup has already happened now. You might find someone interested in buying a 50-80k car that does not have a 7.5k+ tax liability but it will certainly be a hard sell to most people when they can buy a new one for less.

 

[Msjulie]

but it will certainly be a hard sell to most people when they can buy a new one for less.

I didn't sell mine for more than I paid, it was discounted on miles and age but *not* because we are taxed enough to be able to take the credit and not every buyer is... the value of the car was the value of the car and I agree with supply/demand influence.

For a buyer who won't qualify for rebate (we don't for Ca) then a lightly used one at a normal discount can be the better deal than a new one in the end.

I guess the more I read about folks 'informing' others that their car is magically worth -$7500 on top of standard used car calculations, the more I think that is just ridiculous.

Mind you I'm not talking strictly about supply/demand driven pricing, I'm talking about standard new car deprecation practices. Tax credits seem to have nothing to do with it and next January they will have even less

 

[Glamisduner]

I didn't sell mine for more than I paid, it was discounted on miles and age but *not* because we are taxed enough to be able to take the credit and not every buyer is... the value of the car was the value of the car and I agree with supply/demand influence.

For a buyer who won't qualify for rebate (we don't for Ca) then a lightly used one at a normal discount can be the better deal than a new one in the end.

I guess the more I read about folks 'informing' others that their car is magically worth -$7500 on top of standard used car calculations, the more I think that is just ridiculous.

Mind you I'm not talking strictly about supply/demand driven pricing, I'm talking about standard new car deprecation practices. Tax credits seem to have nothing to do with it and next January they will have even less

So you would buy a used car with a $5000 discount over a new car that you can customize yourself with a $7500 tax credit. Maybe I'm not understanding what your saying but the math is pretty basic for most people?

 

[Msjulie]

If I qualify for the tax break and the math works, of course not -

I guess I'm not explaining correctly - all I'm saying is that the value of the car is not implicitly -7500 because I claim the tax credit. It will certainly be impacted by other market forces including demand and availability, just like any other car or product someone can buy.

Because I qualify for a lower/higher car loan rate than someone else, does that mean the car should be priced differently for me vs them? There's apples and oranges being compared here and it muddles the issue.

Claiming that the car loses -7500 immediately on top of the other not-new-car deprecations 'just because' is, to me, wishful thinking on the part of some potential buyers or just plain inventive math..

No one is forced to buy one used car over another.. mine was perfect though

 

[Glamisduner]

If I qualify for the tax break and the math works, of course not -

I guess I'm not explaining correctly - all I'm saying is that the value of the car is not implicitly -7500 because I claim the tax credit. It will certainly be impacted by other market forces including demand and availability, just like any other car or product someone can buy.

Because I qualify for a lower/higher car loan rate than someone else, does that mean the car should be priced differently for me vs them? There's apples and oranges being compared here and it muddles the issue.

Claiming that the car loses -7500 immediately on top of the other not-new-car deprecations 'just because' is, to me, wishful thinking on the part of some potential buyers or just plain inventive math..

It's a temporary depreciation which will start be be phased out next year Which is why I suggest holding onto it.

 

[Msjulie]

It's a temporary depreciation which will start be be phased out next year Which is why I suggest holding onto it.

There is a very good point there (helping to prevent the artificial deprecation of your car based on tax credit) though of course you will have a car 1 year older but also not driving your preferred car for that much longer...

 

[Glamisduner]

There is a very good point there (helping to prevent the artificial deprecation of your car based on tax credit) though of course you will have a car 1 year older but also not driving your preferred car for that much longer...

Yep, from a financial perspective it seems likely better to keep it until tax credit is phased out (no guarantee that tesla won't reduce prices or that they won't fall for some other reason). Buying a new S will also be a 1 year old car a year from now, so you will take the one year old loss no matter what. Guess it depends how bad one want's the S and/or dislikes the 3