EV Tax Credit Question

[Viking1]

I use my new 2016 Tesla MS for mostly for business.

As I was doing my taxes on Turbotax I was shocked to see that I only receive a tax credit on the personal usage of the car. So if I use my car 90% for business and 10% for personal the tax credit comes to $750 instead of $7,500. True I can take a depreciation deduction on the car on the schedule C, but that is much less then the tax credit.

Is this correct?

 

[cpa]

Given the sketchy information contained in your post, yes.

 

[Mike M]

You should check with a CPA, but in most normal situations you would still be able to take the entire tax credit, whether business use or not.

Is the car registered in your name or the business? If it is in your name, you definitely would get the credit. If it is registered in the business name it would go to the business, but for most people (who have an S corp or LLC) this still flows down through their personal taxes and you would still take the credit.

However, without knowing the full details, one can't say for sure.

 

[Half Dollar Bill]

Well, the depreciation would equal the price of the car over the asset's life, so in the long run it's going to be WAY more than the tax credit.
But I'm also thinking that the starting asset value is going to be net of the tax credit.
It's probably easier to just pay the extra couple bucks for Turbotax's help and be done with it.

 

[Viking1]

I have a sole proprietorship business (hence the Schedule C). The car is in my name. When I filled in Schedule C I added the car as an asset and entered business and personal miles. I was offered a depreciation (up to about $11,000). It did not ask about tax credit at that point. Later the process (in the personal deductions section) I entered the MS info, including VIN. Then it asked about business use again. After that it said congratulations, you get a federal tax credit of $7,500. However, later it showed a much small amount. The amount was $7.500 * personal (non-business use) percentage.

I'm using Turbotax in doing my return.

 

[namlio]

I have a sole proprietorship business (hence the Schedule C). The car is in my name. When I filled in Schedule C I added the car as an asset and entered business and personal miles. I was offered a depreciation (up to about $11,000). It did not ask about tax credit at that point. Later the process (in the personal deductions section) I entered the MS info, including VIN. Then it asked about business use again. After that it said congratulations, you get a federal tax credit of $7,500. However, later it showed a much small amount. The amount was $7.500 * personal (non-busi

I'm using Turbotax in doing my return.

Maybe a dumb question, but do you have enough tax liability to use the full tax credit? In effect, do you still owe taxes after application of the tax credit? If so, try using the help option in Turbo Tax and see if you get an answer. If not, you can only use as much credit as you have in tax liability. Once your tax liability is zero, you can no longer use the credit.

 

[Viking1]

Maybe a dumb question, but do you have enough tax liability to use the full tax credit? In effect, do you still owe taxes after application of the tax credit? If so, try using the help option in Turbo Tax and see if you get an answer. If not, you can only use as much credit as you have in tax liability. Once your tax liability is zero, you can no longer use the credit.

Not a dumb question at all. There is plenty of business income (tax liability) to cover. I can see the form 3800 (general business credit) is being used. The business portion of the credit is going in, but "0" is coming out.

I've tried changing the 179 deduction, but to no effect. I guess I can study it further to understand what is going on, but I'm inclined to just drop it as a business asset (deduction) to get the full credit. That will reduce my tax liability.

 

[Mike M]

I don't believe you can take a 179 deduction for a passenger car. One of the reasons we bought our X and put in the business name is we can take a 179 deduction due to its GVWR (Hummer loophole) which does not apply to the S. You can take 1/20th of a Model S value in depreciation (times the business use percent) but not more. The Model X on the other hand can be depreciated over 5 years instead of 20 and qualifies for taking a 179 deduction.

 

[cpa]

Of course you already knew that general business credits are limited by not only the tax on the income generated by said business but also by the Alternative Minimum Tax.

I might augment Mike's comment by saying that personal assets are never allowed a deduction for depreciation. Never.

 

[Viking1]

Unless I'm mistaken, assets such as a car, which may be used partly for personal and partly for business purposes may be depreciated to the extent of the business use of the asset and the actual expense method is chosen for the costs.

I did not know that about AMT. I'll check if that is the issue. Thanks.