Another Fed. Tax Credit question

[ItsNotAboutTheMoney]

Correct. Tax is calculated before (and therefore independently) of payments on the 1040.



The IRS defines 'acquired' as

>Acquired. A vehicle is not “acquired” before the date on which title to that vehicle passes under state law.

and then says

>(3) The vehicle is acquired for use or lease by the taxpayer, and not for resale;

So the person that uses the car gets the credit. Whether or not that person also has to be the titleholder is up for interpretation.

Plug-In Electric Drive Vehicle Credit (IRC 30D)

The vehicles must be acquired for use or lease and not for resale. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used predominantly in the United States. For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when ]B]title to the vehicle passes to the taxpayer[/B] under state law.

The rules are totally clear to me:
- The taxpayer has to be an owner on the first issued title.
- The taxpayer cannot claim if the car was purchased for resale.
- The taxpayer cannot claim until the car is in use. The year in which the car was "put in service" determines the tax year.
- The taxpayer cannot claim until the title has been issued.
- Year in service and year of title don't have to be the same. The taxpayer just needs both to be complete before filing.

So, if you want to buy on someone else's behalf and allow them to claim the tax credit you have to make sure that their name is on the title.
If Tesla insists that your name is on the title, you'd need to have both names on the title.
At that point it's a matter of trust.

If Tesla won't put the other name on the title application then it's not going to work in a way in which the recipient could legally claim based on the stated rules.

 

[IlliniPDX]

Any thoughts on this article, which claims the credit will go to the top name on the title if there is more than one name on the title? https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work

That suggests that unless Tesla is willing to make the person you are buying for the primary title holder (unlikely, per the Tesla rep I spoke with on the phone) they will not be able to claim the tax credit.

That said, the same Tesla rep suggested that I add the person for whom I am purchasing the second Model 3 as the alternate contact on our My Tesla account. He said this would give the delivery specialist the most possible flexibility with whose name goes where on the paperwork, but could not guarantee anything.

 

[Lloyd]

You can also put the car in both your names as long as one only takes the tax credit. Tesla will allow you to add a name to the registration.

 

[gambit48]

Why not take both cars in your name and take the $15K tax credit? Then sign one over to your parents and give them a check for $7500.

That's the "worst" case scenario and what I'm trying to avoid. However, if it comes to that, that's what I'll do. My dad doesn't want to retire and still makes more than me, so he could really use the tax credit although I guess it doesn't make too much of a difference in the end.

The safest bet is registration in both names at purchase, then delete your name in a couple of months so that you "put the vehicle into service."
There is potential liability for you if your parent drives it into something or someone while you're on the title, as you'd be jointly liable (for anything insurance doesn't pay, of course).

Thank you. I think that's what I'm going to do. The potential liability is honestly the main worry I have. I think age is finally creeping up on them, which is why the autopilot is a big draw to them. Anything helps.

I spoke with my financial advisor this morning regarding a related tax-credit issue. The conclusion was that I can reduce my withholding so it is $15,000 less than your present withholding, presuming both will be delivered at such time you'll be eligible for the full $7,500 tax credit on each vehicle.

Hope this information is as helpful to you as it was to me!

I'm considering this. It's not that the withholding will affect my eligibility, but if I withhold, I get to use my money sooner rather than giving the gov't a $7,500 (or $15,000) interest free loan. But, I'd have to remember to change it back and my life is busy enough as it is...

 

[gambit48]

Doesn't sound like there's a way for my dad to get the tax credit though, huh?

 

[gambit48]

You can also put the car in both your names as long as one only takes the tax credit. Tesla will allow you to add a name to the registration.

I think the issue is the difference between who is on the title and who is on the registration. It's two separate things. It sounds like the Tesla reps are saying I have to be on the title. However, I know that Tesla is pretty lenient on who you put down on the registration. I know I want my parents on the registration, especially if it means the Tesla delivery specialist can have it shipped down to where my parents live and I don't have to be there at delivery. I can be there if I have to, but I don't want to make an extra trip out of it just for this.

The confusion is whether that discrepancy (between who is on title vs registration) affects who can take the tax credit. Along with liability, ability to put onto insurance, and all that jazz...

 

[IlliniPDX]

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

The text of the Internal Revenue Code (d.1.a) states that the use of the vehicle must commence with the taxpayer claiming the credit. Based on this, you should be claiming the credit, as you are the vehicle user.

https://www.irs.gov/pub/irs-pdf/i8936.pdf

The instructions for form 8936 state:

"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."

As long as you are on the title, you are an owner. I don't see anything stipulating that you need to be the top name or the only name on the title to claim the credit. This combined with the above statement about being the vehicle user to me is sufficient justification for you to claim the credit. Further, the interpretation of this is only important IF the IRS decides to audit your return.

Here is the IRS form itself for claiming the credit: https://www.irs.gov/pub/irs-pdf/f8936.pdf

I see nothing here that contradicts or otherwise informs the above conclusions. I believe the key is for Tesla to allow both of your names on the title.

 

[IlliniPDX]

Edited with correct pronouns for this context:

The text of the Internal Revenue Code (d.1.a) states that the use of the vehicle must commence with the taxpayer claiming the credit. Based on this, your dad should be claiming the credit, as he the vehicle user.

https://www.irs.gov/pub/irs-pdf/i8936.pdf

The instructions for form 8936 state:

"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."

As long as your dad is on the title, he is an owner. I don't see anything stipulating that he needs to be the top name or the only name on the title to claim the credit. This combined with the above statement about being the vehicle user to me is sufficient justification for him to claim the credit. Further, the interpretation of this is only important IF the IRS decides to audit his return.

Here is the IRS form itself for claiming the credit: https://www.irs.gov/pub/irs-pdf/f8936.pdf

I see nothing here that contradicts or otherwise informs the above conclusions. I believe the key is for Tesla to allow both of your names on the title.

 

[Lloyd]

I think the issue is the difference between who is on the title and who is on the registration. It's two separate things. It sounds like the Tesla reps are saying I have to be on the title. However, I know that Tesla is pretty lenient on who you put down on the registration. I know I want my parents on the registration, especially if it means the Tesla delivery specialist can have it shipped down to where my parents live and I don't have to be there at delivery. I can be there if I have to, but I don't want to make an extra trip out of it just for this.

The confusion is whether that discrepancy (between who is on title vs registration) affects who can take the tax credit. Along with liability, ability to put onto insurance, and all that jazz...

In California the title and registration is the same. You can have more than one person listed, but only one can claim the credit.

 

[cpa]

No one outside the monolithic IRS really knows how much they scrutinize these tax credits. Based upon decades of experience, the recent trends are for correspondence audits, and much fewer in-person audits. The computers can match-up third-party reporting and generate notices for apparent underreporting of income (like from W-2 and 1099) and overreporting of deductions (like form 1098 mortgage interest.) Moreover, every return is scored and if something looks awry, a correspondence audit notice is generated requesting submission of receipts (like for charitable contributions) to substantiate deductions.

In-person audits are reserved for more judgmental situations like a large Schedule C business or a 183 issue, or a number of pass-through entities that could easily be 469 problems, depending upon a taxpayer's other sources of income.

My guess that any IRS audit of the Section 30D credit would be a correspondence audit. They would not want to inspect the vehicle. That said, Tesla self-reports to the IRS on a quarterly basis the number of cars sold domestically that count against the 200,000 threshold. It is unclear to me if Tesla also files with the Service the VINs and title holders. I have not heard of any audit activity on this credit as yet. TIGTA did issue a memorandum back in 2011 that took the IRS to task for allowing improper credits claimed on tax returns, and the IRS replied with steps they would be taking in the future. A couple of million dollars of erroneous credits were eventually disallowed and collected (plus interest and perhaps penalties) from these taxpayers.

If the correspondence audit left open questions to the clerk who reads a taxpayer's reply and supporting documentation, then the clerk would kick the issue to an office (in-person) audit.

So, I guess this is a prolix response to title the car in the name of the person who will be driving the car, and have that person claim the credit. Everyone wins. If your folks will be driving the car, list their names first and yours second (to satisfy Tesla), and have them claim the credit(s). You can always remove your name after a year or so.