EV $7500 Federal Credit - Alternate Minimum tax

[cciesingh]

I have a Tesla Model S and my CPA has advised he cant get me the the full $7500 credit this year, only partial credit

The reason being alternate minimum tax requirements (form 6251).

He said the same thing last year. but last year i had solar credits this year there is no other tax credit...

He has calculated that I owe over 20K in Federal taxes for my wife and my joint return for 2016.

What is going on here? As far as i know i just had to owe $7500 in fed taxes to get the $7500 credit.

Can someone please advise

 

[chillaban]

I'm not a tax accountant, but I think you have to owe $7500+ in income taxes to get the credit — namely, if the bulk of your federal taxes are because of AMT's, you can't take the $7500 credit to lower your AMT's due.

Depending on how your income is structured and what other deductions you qualify for, living in CA puts you at higher risk of hitting this corner case because of the extremely high state taxes and the deductibility of state taxes in your federal taxes triggering AMTs.

 

[cciesingh]

I am based in California...Have my own S Corp..... joint return filed for personal and CPA states taxes owed for Fed 20k+ and State 10K+ but I cant claim a $7500 credit....

What is a AMT? I still dont understand why I cant get the credit.. i always thought if you owed $7500 + you get the credit regardless

 

[Zarwin]

The $7500 federal tax credit is not limited by AMT or TMT. Sometimes the IRS gets stupid and tries to apply restrictions since some tax credits are limited by AMT/TMT. I had this happen to me and had to challenge the IRS and succeeded in getting the full credit. Here is the doc that myself and several others worked on years ago that goes over it. It's a little outdated but nothing has changed when it comes to AMT/TMT and the federal EV credit.

EV Tax Credit and AMT/TMT

Edit: and to more directly address your question. Your tax accountant is wrong. Form 6251 requirements do not apply to the $7500 EV tax credit. The credit may be applied regardless of AMT/TMT status. You are correct. If you paid over $7500 in federal taxes (after any other credits) you get the full $7500 credit.

 

[bktiger86]

side question: if you bought the car in 2016 but delivered in 2017 you will file the credit in the year 2018 for 2017 taxes correct?

 

[Zarwin]

side question: if you bought the car in 2016 but delivered in 2017 you will file the credit in the year 2018 for 2017 taxes correct?

You mean you ordered the car in 2016 I assume? You bought the car in 2017 when the paperwork was signed and delivery occurred. Yes, you file in 2018 for the 2017 tax year. or did you actually sign the sales paperwork and take ownership of the car in 2016 and then picked it up in 2017?

 

[sdorn]

You mean you ordered the car in 2016 I assume? You bought the car in 2017 when the paperwork was signed and delivery occurred. Yes, you file in 2018 for the 2017 tax year. or did you actually sign the sales paperwork and take ownership of the car in 2016 and then picked it up in 2017?

I believe you have to actually put the car into service in the tax year to claim the credit, so even if you signed the paperwork in 2016 you can't claim the credit in 2016 unless you took delivery of the car and put it in service in 2016.

 

[bktiger86]

You mean you ordered the car in 2016 I assume? You bought the car in 2017 when the paperwork was signed and delivery occurred. Yes, you file in 2018 for the 2017 tax year. or did you actually sign the sales paperwork and take ownership of the car in 2016 and then picked it up in 2017?

You are correct. I ordered in 2016 but I didn't sign any of the paperwork until 2017 and took delivery in 2017. So I will have to file in 2018 for 2017 tax year.

 

[CmdrThor]

Sounds like you need to fire your CPA. If your tax liability is only $20k there is no way AMT is preventing you from taking the full $7,500 credit. We had $27k tax liability in 2016 and were able to take the $7,500 credit. I was not able to take the Alternative Fuel Infrastructure Tax Credit for installing a Wall Connector.

 

[MyJoule]

I'm not a tax accountant or CPA, and I didn't sleep in a Holiday Inn last night , and my advice, just like all internet advice from strangers, is worth what you paid for it, but.....

1. I've paid AMT for years, I've also purchased 2 Teslas, and 1 Leaf over the last 5 years- and can attest that the tex credit is indeed just that it's a credit, in other words, you are given a credit of $7500 for the purchase of a qualifying EV on your Federal Taxes , which indeed comes off the taxes at the end after all the other AMT and such has been added to your bill, just as Zarwin says above in post #4 so the Original poster's CPA needs to read the tax law again!

2. If you took delivery of the car in 2017, you can't claim the credit on your 2016 taxes, just on your 2017 taxes, which you will file in 2018. The key is, you can indeed reduce your withholdings throughout the year though, to account for this credit, and "earn the money " periodically throughout 2017, In other words, reduce your withholding $625/month ($7500/12) and you'll not have a refund of $7500 next year due to this credit you will have gotten the use of the $7500 throughout the year) Of course this considers that you have enough withheld throughout the year to cover your tax liability. You'll still claim the credit on your return, you just won't have overpaid by $7500 like many will.

Hope that makes sense.

 

[cciesingh]

Car was purchased in last few days of 2015 but registered Jan 2016 due to internal Tesla error.

Long story short my CPA included Tesla Plug in Credit as part of return last year (actually shows on return using his expensive software) he said that due to AMT the full $7500 credit would carry over to next years return.

Now he has populated my 2016 return and states that due to AMT can only use partial credit this year with the remaining balance carrying over to the next year, this i feel is not correct.

I am based in California - hopefully that does not affect anything

In laymans terms what do I say to him? - (see my text below)

"Dear CPA Even though I am subject to AMT the EV Credit of $7500 is exempt from this total and this credit of $7500 gets subtracted from total tax

I found this IRS doc confirming this:

Energy Incentives for Individuals: Questions and Answers

The AMT will not reduce or eliminate the 7.5k credit for a Tesla: per IRS rules, here is the answer: Energy Incentives for Individuals: Questions and Answers

At the very bottom of the article, it says: "Q. Does the Alternative Minimum Tax (AMT) impact the alternative motor vehicle credit?A. Starting in 2009, the new law allows the alternative motor vehicle credit, including the tax credit for purchasing hybrid vehicles, to be applied against the alternative minimum tax. Prior to the new law, the alternative motor vehicle credit could not be used to offset the AMT"

Is my analysis correct?

If so I might add the fact that he cocked up my last years return but please fix this right now!

All advice is appreciated, meeting CPA in morning!

 

[MyJoule]

Again, my advice is just my opinion, so don't take anything I say to the bank.

However, I might consider a new CPA- or doing your taxes yourself. I'm not sure why your CPA isn't up on the law. Turbo Tax is pretty easy to use once you gather all the info, which you have to do when you go to the CPA anyway. Costco sells it for around $60 -$90. I'm sure you are paying your CPA more than that. Unless you have some very complicated situation with an S-corp etc, the run of the mill tax program should work just fine.

As you stated above, the AMT will not reduce or eliminate the 7500 credit. That is pretty clear.
As far as I can tell from what you said, you took delivery in 2015 the full 7500 should have come off your 2015 tax filing ( 2016 tax year) I don't think the credit can carry over like other credits can, You may be out of luck or need to refile 2015 taxes if that is even possible.

Good luck, I hope it works out for you tomorrow.

 

[ItsNotAboutTheMoney]

Again, my advice is just my opinion, so don't take anything I say to the bank.

However, I might consider a new CPA- or doing your taxes yourself. I'm not sure why your CPA isn't up on the law. Turbo Tax is pretty easy to use once you gather all the info, which you have to do when you go to the CPA anyway. Costco sells it for around $60 -$90. I'm sure you are paying your CPA more than that. Unless you have some very complicated situation with an S-corp etc, the run of the mill tax program should work just fine.

As you stated above, the AMT will not reduce or eliminate the 7500 credit. That is pretty clear.
As far as I can tell from what you said, you took delivery in 2015 the full 7500 should have come off your 2015 tax filing ( 2016 tax year) I don't think the credit can carry over like other credits can, You may be out of luck or need to refile 2015 taxes if that is even possible.

Good luck, I hope it works out for you tomorrow.

It's OK. He may have taken delivery in 2015, but if there were titling issues he should be able to claim in 2016. The IRS' note on 30D says "For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.".

 

[patrick40363]

It is a use it or lose it tax credit not subject to AMT. I would look for a different CPA.

 

[cciesingh]

This doc from IRS states that Alternate Motor Vehicle or Hybrid Vehicle is exempt from AMT.

I have a Qualified Plug In Vehicle which I understand to be an Alternate Motor Vehicle, for the benefit of my CPA do have any updated wording from IRS extending this to a Qualified Plug In or better summarising this benefit?

 

[shokunin]

Your CPA needs do some homework. The EV tax credit is not a carry-forward credit nor is it affected by AMT. There must be a ton of people on here in California that face AMT due to our state's high income tax, which gets treated as a deduction on the federal return.

I've paid AMT for years and have taken the full $7500 tax credit.

 

[mrjedistud]

Zarwin. Great write up. Thank you.

For 2016 I lost my tax credit for the home charger, which your documents acknowledges is subject to AMT reductions. Bummer

 

[seenhear]

Zarwin. Great write up. Thank you.

For 2016 I lost my tax credit for the home charger, which your documents acknowledges is subject to AMT reductions. Bummer

There's a tax credit for getting a home charger? How much is it? I usually pay AMT (CA resident) though, so you're saying it goes away when paying AMT?

 

[cciesingh]

So lets add something else into the mix:

I have my own S Corp in California, the vehicle was purchased in my company name with my name also appearing on Sale and registration docs....

It is included as a business vehicle and depreciates......

CPA seems to think as per below:

To quote in the Cornell article
this credit is treated as business credit under Section 38(b) SUBJECT to AMT.

Code Sec 30C"(d) Application with other credits
(1) Business credit treated as part of general business credit
So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) that is attributable to property of a character subject to an allowance for depreciation shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a))."

Should I still be getting the credit on my personal joint federal tax return?

 

[MorrisonHiker]

There's a tax credit for getting a home charger? How much is it? I usually pay AMT (CA resident) though, so you're saying it goes away when paying AMT?

From what others have said, usually if you pay AMT, you can't claim both tax credits in the same year. I claimed them on two different years. I don't know if they extended the tax credit so if you haven't already installed a charger/wiring/etc., then it might already be too late.

See
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