I currently estimated to get a IRS tax refund after all my deductions in the neighborhood of $1700 next year. If I understand the EV tax credit I can only claim the amount I owe the IRS which in my case is going to be zero. Does anyone know if the IRS applies the EV credit of 7500 first before applying refundable tax credits? I'm trying to figure out if I'll get any tax credit back if I buy a Model X this year.
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Any EV Tax Credit Gurus or Accountants?
- Thread starter Chuck305
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Tam
Well-Known Member
It is not about tax refund.
It is about tax liability.
For simplicity:
If I have a tax liability of $7,500 and the w-2 has withhold the $8,200 amount, in a normal year, I would get $1,700 refund.
But when you filed the ev credit, you get both your normal $1,700 And another $7,500, for a total of $8,200.
That's because your tax liability is $7,500 but you got 7,500 credit to pay up your liability. So your tax bill is zero. Whatever was the withholding amount in w-2 is refunded to you.
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Bigriver
Member
I agree with @Tam’s explanation above about the tax credit being relative to overall tax liability, not what you get back as a refund next year.
Nonrefundable credits stack on top of each other up to your tax liability, then refundable credits apply after that. So if you have a tax liability of $7500, the EV nonrefundable credit of $7500 and an education refundable credit of $1000, you will get a refund of all your federal withholdings/tax payments from this year plus $1000.
Also make sure that the price stays below $80k.
Tam
Well-Known Member
Thanks for sharing and yes I spoke with my local Tesla store and they have a new 2023 Red Model X for the newly reduce price making it under 80k before taxes etc. For clarification as I don't know much about taxes if I paid 20,000 in withholdings and my tax liability is 19,000 that would mean I will get a refund check of $8500?
Refund Check = 20000 - (19000-7500)
I'd wait till Jan 2024, but since Tesla doesn't give the tax rebate on leases I'm guessing Tesla won't give the tax break on new purchases next year either.
Tam
Well-Known Member
Your refund check will be $1,000. Here's how:
If you can look up your 2022 tax, form 1040, line 24. It says:
24. Add lines 22 and 23. This is your total tax.
That is your tax liability. This is what the IRS wants you to pay based on income and deductions (you didn't deduct $7,500 on your 2022 filing)
If your financial situation is the same, your 2022 tax, form 1040, line 24 should be a good guide on how much IRS wants you to pay.
For simplicity, if 2023 form 1040, line 24 says $19,000. That means the IRS wants you to pay $19,000. That's your tax liability.
If your 2023 W2 says the Federal Tax Withholding is $20,000, that means you paid too much and you should get $1,000 back.
Notice that you don't get an additional $7,500 back or a total of $8,500 because that $7,500 is included in the deduction on line 20.
Without that line 20, your tax liability would be $26,500. The reason the line 24 tax liability becomes $19,000 is because $26,500 - $7,500= Tax Liability of $19,000.
You can only use that $7,500 once before line 24, tax liability, and none after line 24.
IRS wants $19,000, your W2 withholds $20,000, and your Refund Check will be $1,000.
I don't think you get $7,500 tax credits for leases, but lease companies may persuade you that they reduce that amount in your payment.
EV tax credits are very complicated, depending on many factors, including critical minerals... For 2023, it's now settled, and we know the rules.
2024 is uncertain because Tesla hasn't confirmed that it will comply with all the requirements for us to get the EV credits.
@Chuck305 : Here's your $19,000 tax liability and $20,000 W2 withholding resulting in $1,000 refund example:
So in the following scenario...
Line 18 = 19500.00
Line 21 = 7500.00
Line 33 = 20000.00
then Line 34 = 8000.00
Is this tax math correct?
Elon for President.. maybe he can simply taxes LOL
Tam
Well-Known Member
Correct! You got it!
Line 18: Tax liability before any EV credit application= $19,500
Line 21: is EV credits applied= $7,500.00
Line 24: Total Tax/Liability=$12,000 after EV credit applied
Line 33 Withholding amount= $20,000.00
Then Line 34: Refund to you = $8,000.00
arvindm
Member
No Federal Tax Credit for Model X and your AGI has to be 300k or less if you file a joint tax return
NJturtlePower
Living the Dream, Driving the Future!
The "Bearded Tesla Guy" explains it best, better understood than most CPA's IMO. He's got a whole series on the Federal incentives including the now Point-of_Sale in 2024.
It's all about liability and for most people your payroll deduction, nothing to do with an actual "Refund".
Just filed for my 2023 X credit. TurboTax filing says currently delayed until 2/14 for the form (IRS Form 8936) to be updated.
It's all about liability and for most people your payroll deduction, nothing to do with an actual "Refund".
Just filed for my 2023 X credit. TurboTax filing says currently delayed until 2/14 for the form (IRS Form 8936) to be updated.
Where are you seeing there is no longer a Tax Credit for the MX? Or am I just misunderstanding your reply.
arvindm
Member
I think the price cap on X make it ineligible as the Tax Credit is good for vehicles up to 80 Grand if you use it for personal use. There is no cap if you buy it for business use. Currently most X are priced over 80 grand. Plus your AGI must be less than 300K for the tax year.
NJturtlePower
Living the Dream, Driving the Future!
The base X @ $79,990 is still eligible as is was last year. You just cant add any options right now or color besides the now free Stealth Gray.
Just filed for my $7500 on my 2023 Ultra Red (free color at the time) 5-seater and Yes, our AGI is under $300k filed jointly...non-issue.
arvindm
Member
Its 79990 for all models as a base price. Tesla has strategically priced it 10 bucks below the price range of 80K for folks to qualify for fed tax credit. What you are looking at is after the estimated savings. Even then it will be eligible for 7500 tax credit. Added extras are not relevant as far as the tax credit is concerned. Good luck on your purchase though.
Something is being lost in the back and forth. I already have my refreshed 23 MX before the pricing change. I was responding to you saying the MX is no longer available for the Tax Credit.
I was just clarifying a "Base" (no options added) MX is still eligible for the credit.
arvindm
Member
That was my miscalculation. I was thinking that MX would not qualify for Tax Credit as the total price with all the extras would exceed the 80 K mark. But! apparently only the base price matters (Not the price after additions) and yes you will qualify for the 7500 credit. Price after savings is a hypothetical number and I don't know why Tesla lists it as it a bogus number. They only take fuel savings into account and we all know there is more to cost of the vehicle than fuel savings alone. Higher tax, Higher Insurance cost, cost of installing the charge point, higher tire wear and higher repair costs and biggest of them all, huge depreciation on EV all must be factored in.
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NJturtlePower
Living the Dream, Driving the Future!
No you're still incorrect / wrong. See my response above where I quoted your post.
ONLY the base 5-seater X vehicle at $79,990 qualifies. ADDING ANYTHING with make it ineligible for the credit.
Same goes for inventory discounts.... Example: Vehicle was $82,500 discounted to $79,500 would NOT qualify because the original MSRP on the sticker exceeds the $80k cap.
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