Anyone not get the full $7,500 tax credit?

[azax456]

Hey all - I am likely on the lower end of income for those ordering/owning a Tesla; I am worried about getting the full $7,500 tax credit. If I won't get the full amount a family member with a much higher income is going to buy the car and later give me the credit when they claim it and then sell me the car on paper. Can anyone give me a heads up for what I should look for on my taxes or way to determine if I would get the full amount?

Thanks in advance!

 

[pgiralt]

I'm not an accountant or tax expert, so take this FWIW, but as far as I know, if your total tax liability is at least $7,500, you can take the full credit. This means for a single person with no exemptions (other than themselves) and no itemized deductions, your income must be a little more than $57,000 to get to the full $7,500.

 

[Owner]

I didn't --- twice....

I play "volunteer tax professional" during the tax season...but am NOT a professional

The credit is a bit complicated if you don't have a "job".... living off investments is complicated to plan for tax season.

 

[ndhaon91]

I'm not an accountant or tax expert, so take this FWIW, but as far as I know, if your total tax liability is at least $7,500, you can take the full credit. This means for a single person with no exemptions (other than themselves) and no itemized deductions, your income must be a little more than $57,000 to get to the full $7,500.

Right. The only reason you wouldn't technically get the full credit is if you somehow owed less than $7500 in total taxes by the end of the year. And in that case, you're still paying zero total income tax to Uncle Sam for the year, which is literally as good as it gets unless you're below the poverty line, receiving welfare, etc. It's not like the rest of us are getting an EXTRA $7500 in our pockets. We're just getting back $7500 of what we've already paid in taxes via paycheck deduction, quarterly tax payments, etc.

 

[Lloyd]

If you have a tax loss carry-forward from a previous year, you may not have the tax liability that you think you have.

 

[Bet TSLA]

I paid no taxes that year and got no credit. Dumb. Should have leased.

 

[Super_Popular]

What was your taxes for last year?, did you owe or get a refund?...if things have not changed from last year you can gage from that. For the last 3 years I have bought a new Tesla and only get a $5500 refund so I did not get full refund. A lot of people don't. Thank god for the CPO program!

 

[freeewilly]

I hope the family member you're referring to is very close to you, because whoever drives this car and get into an accident, if the driver is at fault. The other party will claim for insurance first, if insurance doesn't cover the damage, they will sue the owner of this car, not the person who drives the car.

I'm not an accountant, if you receive the car as a gift. You don't have to pay tax, but your family member need to pay gift tax when it's over $13,000. Which means you have to pay tax twice, first time when you purchase the car then when you received it as a gift.

 

[brucet999]

I hope the family member you're referring to is very close to you, because whoever drives this car and get into an accident, if the driver is at fault. The other party will claim for insurance first, if insurance doesn't cover the damage, they will sue the owner of this car, not the person who drives the car.

I'm not an accountant, if you receive the car as a gift. You don't have to pay tax, but your family member need to pay gift tax when it's over $13,000. Which means you have to pay tax twice, first time when you purchase the car then when you received it as a gift.

Technically, the giver pays gift tax, not the receiver.

 

[Max*]

What was your taxes for last year?, did you owe or get a refund?...if things have not changed from last year you can gage from that. For the last 3 years I have bought a new Tesla and only get a $5500 refund so I did not get full refund. A lot of people don't. Thank god for the CPO program!

Emphasis mine, I think you're confusing things here. Owing taxes or getting a refund at tax time is independent from the $7,500 credit.

[Assuming you owe at least $7,500 in taxes, and have a typical job, there are more caveats otherwise]
-You can owe taxes (if you underpaid taxes during the year) and still get the full $7,500 (but it may appear that you're only getting a check for $5,500 if you paid $2k less during the tax year).
-You could have overpaid taxes during the year from your payroll deduction, and after you claim the $7,500 actually get $9,500 back.
But in both cases you're getting the full $7,500 credit back.

 

[swaltner]

As has been mentioned, the key item is your total tax. This is line 63 on the 2014 1040 form. The amount you get as a refund or owe at the end of the year (line 75 or 78) don't have any bearing on this. As others mentioned, as long as your tax situation doesn't change wildly, you can use last year's taxes as a guide for your 2015 taxes.

If I was me and I only owed $5,000 in total tax in 2014, expected a similar situation for this year, but was planning on buying an EV in 2015, I'd do a Roth IRA conversion on some money that was in a traditional IRA. Converting from a traditional IRA to Roth IRA would artificially inflate your income for 2015. By doing the conversion now, when you're shy on tax liability to fully take a $7,500 EV tax credit, you get a "free conversion" on that money and in essence, never have to pay taxes on it. The big problem with this is guesstimating how much money you would need to convert to generate enough tax liability, but not too much that you need to kick in extra money. You would need to make this conversion by Dec 31 to have it count for the 2015 tax year. Not the perfect solution, but definitely an easy way to inflate your income at will, if it's to your advantage to do it.

 

[brucet999]

If I was me and I only owed $5,000 in total tax … I'd do a Roth IRA conversion on some money that was in a traditional IRA. Converting from a traditional IRA to Roth IRA would artificially inflate your income for 2015. The big problem with this is guesstimating how much money you would need to convert to generate enough tax liability, but not too much ….

Actually, not too difficult if your 2015 income can be pretty closely predicted. Run your taxes as a pro-forma on Turbotax or Tax Cut (or ask your accountant to run it for you) to determine tax liability for the year and subtract that from $7500. Use the tax tables (available at Internal Revenue Service) to see what your marginal tax rate (highest category for your income) and then divide the amount you need to make up by that rate and, voila, there's the extra amount of taxable income (Roth conversion or, for those over 70 1/2 years old, IRA withdrawal) you need.

 

[LetsGoFast]

I hope the family member you're referring to is very close to you, because whoever drives this car and get into an accident, if the driver is at fault. The other party will claim for insurance first, if insurance doesn't cover the damage, they will sue the owner of this car, not the person who drives the car.

I'm not an accountant, if you receive the car as a gift. You don't have to pay tax, but your family member need to pay gift tax when it's over $13,000. Which means you have to pay tax twice, first time when you purchase the car then when you received it as a gift.

I'm not looking to be a tax advisor, but the reporting requirement for this year is 14k, not 13k. And you have a $5.4 million lifetime exemption from gift tax, so unless your estate will exceed that you still wouldn't owe tax.

 

[Skotty]

Something weird is going on if you buy a Tesla Model S and don't get the full $7500 tax credit. Either you live in a cardboard box with a Tesla sitting out front, or you have some wacky finances and aren't doing the typical work for your money thing. I could see the former if you are young, employed, but still happily living off college-grade food and college-grade living quarters. The latter? I don't know, I've always worked for my money. My wife and I can barely afford a Tesla S or X, but I don't have to check my taxes to know my tax liability is WAY higher than $7500.

 

[Jhall118]

Something weird is going on if you buy a Tesla Model S and don't get the full $7500 tax credit. Either you live in a cardboard box with a Tesla sitting out front, or you have some wacky finances and aren't doing the typical work for your money thing. I could see the former if you are young, employed, but still happily living off college-grade food and college-grade living quarters. The latter? I don't know, I've always worked for my money. My wife and I can barely afford a Tesla S or X, but I don't have to check my taxes to know my tax liability is WAY higher than $7500.

You say college grade food like its a bad thing. It's more like "I bring my own lunch rather than spend $10 a day on it like my co-workers". Friends of mine spend 30% of my car payment on fast food and cigarettes, and scratch their heads why I have a Tesla and they don't.

I was making 40k a year when I financed and bought my Tesla. Not hard at all. I moved (rent) from downtown Seattle to the suburbs (my car drives me anyways). If you add my rent and car payment together it is roughly equivalent to someone living downtown with a Prius.

It's a myth that this car is not affordable to the average person. If you want it, you can have it (okay, as long as you don't have kids!).

I got the full credit by working for Uber on the weekends. 1099 work is a great way to get your tax liability up high!

 

[FlatSix911]

Great information - thanks

 

[electracity]

Take enough capital gains to have sufficient tax liability. This wouldn't normally be a problem for someone living off investment income who has the means to buy a Tesla. If you living off a trust, talk to the trust officer who will sell assets and pass the tax liability to you.

If it's drug money, don't worry about it. If you are buying a Tesla with cash, your poor money laundering skills are going to put you in prison anyways. Enjoy the Tesla now.

 

[Skotty]

You say college grade food like its a bad thing. It's more like "I bring my own lunch rather than spend $10 a day on it like my co-workers". Friends of mine spend 30% of my car payment on fast food and cigarettes, and scratch their heads why I have a Tesla and they don't.

I was making 40k a year when I financed and bought my Tesla. Not hard at all. I moved (rent) from downtown Seattle to the suburbs (my car drives me anyways). If you add my rent and car payment together it is roughly equivalent to someone living downtown with a Prius.

It's a myth that this car is not affordable to the average person. If you want it, you can have it (okay, as long as you don't have kids!).

I got the full credit by working for Uber on the weekends. 1099 work is a great way to get your tax liability up high!

At $40K per year, the bring home is maybe $30K after state and federal taxes. Even the cheapest of Tesla's runs close to $1,000 per month on a long loan term. Which means spending over 1/3 of one's salary on a car payment. Doable, but it's a tall order for most people, not leaving much room for other things.

EDIT -- I don't mean any of this in a bad way. I'm jealous, and trying to trim down my financial liabilities to make more room for a Tesla payment, but it can take years of preparation.

 

[Owner]

Taxes are complicated. And being more than fortunate to live off gains from money earned earlier in life is a great lifestyle. :biggrin:

But with the majority of money in stocks, the market goes up and down a lot. And taxes are tweaked and offset with mortgage interest (which only exists for tax purposes) and also local property tax. When buying a Tesla, that year you need to make enough capital gains to offset your highly tuned tax situation.

During the last 10 years the stock market has been very volatile. Huge (insane) gains and huge losses and a bunch of modest gain years. Its not a problem if you have enough resources but it is not as easy as you think to recoup this tax credit without a reasonable amount of planning.

Money folks don't speak taxes for legal reasons. during this process I ended up changing my tax accountant to one I like better and is a much better value.

It is very funny because I actually am a volunteer tax preparer. But turbo tax crashes on my data, and I actually think the advice of a professional is worth it.

If you work the situation just does not have the same volatility.

Take enough capital gains to have sufficient tax liability. This wouldn't normally be a problem for someone living off investment income who has the means to buy a Tesla. If you living off a trust, talk to the trust officer who will sell assets and pass the tax liability to you.

If it's drug money, don't worry about it. If you are buying a Tesla with cash, your poor money laundering skills are going to put you in prison anyways. Enjoy the Tesla now.

 

[HankLloydRight]

Taxes are complicated. And being more than fortunate to live off gains from money earned earlier in life is a great lifestyle. :biggrin:

Now I know for sure you're Elon Musk!!!