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Federal Tax Credit may be coming back for Tesla purchases

ucmndd

Well-Known Member
Mar 10, 2016
6,383
11,894
California
I couldn't read the proposal because the link showed unavailable. Is the tax credit for used a refundable credit or maybe rolls over to subsequence years? That would make sense since no one with $40k income comes close to a $7000 tax bill.
The proposed credit for used EVs is $2400 max I think. Definitely not $7k.
 

MarcG

Active Member
Oct 29, 2014
2,979
1,811
San Francisco
I couldn't read the proposal because the link showed unavailable. Is the tax credit for used a refundable credit or maybe rolls over to subsequence years? That would make sense since no one with $40k income comes close to a $7000 tax bill.

Here’s the link to the proposed bill:
GREEN Act of 2021 - Lexology

More details here:
https://mikethompson.house.gov/sites/mikethompson.house.gov/files/GREEN Act 2021 sxs.pdf


Let’s get a few facts straight:
  • This is still a bill, not law - but chances that it passes are high given the current political climate (it would have most likely been shot down during the last 4 years, hint hint)
  • The proposal extends the $7,500 tax credit (the existing reduction of paid federal taxes, up to that amount, etc.) beyond the 200,000 vehicle per manufacturer limit that’s currently imposed (and that GM and Tesla have already surpassed) to up to 600,000 vehicles at $7,000 (so $500 reduction from the first 200,000)
  • The vehicles sold between the time a manufacturer hit the 200,000 limit and the time the bill is passed don’t count for the new extension, i.e. the additional 400,000 vehicles eligible for the $7,000 tax credit start counting at the time the bill is passed
  • It is unlikely that the vehicles sold between the two timeframes set above will be eligible
  • The $40,000 income limit only applies for used vehicle sales and the tax credit is only up to $2,500
 
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Magellan55

Member
Aug 30, 2018
376
350
Chapel Hill, NC
So the used vehicle tax credit is refundable according to that link above. That means if you don't owe enough tax (or any tax), the feds send you a check. no mention of this for new vehicles, and from what I can find on the IRS site the original credit was not refundable. So this could really help someone buying a used Leaf for example, but probably not too many used Tesla's are cheap enough yet for someone making only $30K.
 

Magellan55

Member
Aug 30, 2018
376
350
Chapel Hill, NC
Now I'm wondering what this proposed law will do to Tesla's US sales. How many will wait to buy until it passes? We're considering a 3-row Y to replace my wife's Highlander, and we're definitely in the wait-and-see mode now.
 

David_Cary

Active Member
Dec 17, 2012
1,182
672
Cary, NC
The Used income limit is $60k for couples (which might be obvious but that is more likely than $30k from an individual). It also requires sale by dealership. Or at least, it says purchased from a "dealership". That is too bad.
I could definitely see a grad student buying a used Tesla with help from a relative despite a low income. Or a college student especially if the credit was refundable.
Sounds like $2500 would be for any Tesla since it is based on battery capacity.
I wonder how many modest income folks will know about this tax credit. Really have to wonder what they are thinking with this credit.
 

MorrisonHiker

S 100D 2021.4.15
Mar 8, 2015
9,563
8,741
Colorado
The Used income limit is $60k for couples (which might be obvious but that is more likely than $30k from an individual). It also requires sale by dealership. Or at least, it says purchased from a "dealership". That is too bad.
I could definitely see a grad student buying a used Tesla with help from a relative despite a low income. Or a college student especially if the credit was refundable.
Sounds like $2500 would be for any Tesla since it is based on battery capacity.
I wonder how many modest income folks will know about this tax credit. Really have to wonder what they are thinking with this credit.
Several years ago, Colorado's EV tax credit applied to both new or used vehicles. It really created a huge demand for used EVs. A few EV dealerships opened up which imported used EVs from out of state and sold them very cheaply in Colorado. My previous employer put in 36 Level 2 charging stations and the number of employees with EVs jumped from a few dozen to several hundred.
 
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TurboBear

Member
Apr 2, 2016
164
142
Durham, NC
Any reason not to believe Tesla won't simply increase prices when/if the new credit goes into effect, much like they lowered the price on existing models as the credit phased out in 2019?

You'd need an open order and keep unmatching VINs to lock in current pricing.
 
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MarcG

Active Member
Oct 29, 2014
2,979
1,811
San Francisco
I'm no tax expert, but I'm pretty sure that tax law in annual. So even if you bought your car on Jan 1, if the bill gets passed this year, it will count.

I posted this in another thread (relevant text in bold):


According to the proposed bill, the vehicles sold after the manufacturer hit 200,000 and before the bill is passed don’t count for the extra 400,000 allocation.

However, it is true that this doesn’t necessarily mean some vehicles sold in-between those milestones aren’t eligible for the tax credit. For example, Tesla hit the 200,000 milestone in June of 2018, but the full tax credit was still available for until the end of 2018, and half the credit for the first half of 2019.

Given that it’s a federal tax credit that usually applies for a full calendar year, it is possible that Tesla vehicles sold in early 2021 qualify for the credit when filing for 2021 taxes in 2022 - however there is no guarantee of that, until the bill passes with full rules and limits detailed (assuming it even passes in the first place). For example, the bill could pass in late-2021 and only take effect on January 1st of 2022 for that tax year.

So if the tax credit is an absolute must-have for some folks who have budget limits, I would say it’s prudent to wait until the bill passes (or buy another EV of lower cost). For the vast majority of Tesla would-be buyers, the tax credit is simply a nice-to-have, so shouldn’t be a prerequisite.
 

Str8down

Member
Jan 28, 2021
76
98
Jax beach
I posted this in another thread (relevant text in bold):


According to the proposed bill, the vehicles sold after the manufacturer hit 200,000 and before the bill is passed don’t count for the extra 400,000 allocation.

For manufacturers that pass the 200,000-vehicle threshold before the enactment of this bill, the number of vehicles sold in between 200,000 and those sold on the date of enactment are excluded to determine when the 600,000-vehicle threshold is reached.

I read that as having nothing to do with the incentive, but to do with determining when the threshold is met. Otherwise, since Tesla has not only already passed the 200,000 threshold, but also the 600,000 threshold, without that wording, they STILL wouldn't get a new incentive.
 
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MarcG

Active Member
Oct 29, 2014
2,979
1,811
San Francisco
For manufacturers that pass the 200,000-vehicle threshold before the enactment of this bill, the number of vehicles sold in between 200,000 and those sold on the date of enactment are excluded to determine when the 600,000-vehicle threshold is reached.

I read that as having nothing to do with the incentive, but to do with determining when the threshold is met. Otherwise, since Tesla has not only already passed the 200,000 threshold, but also the 600,000 threshold, without that wording, they STILL wouldn't get a new incentive.

Interesting, I actually think we're saying the same think. To clarify, I read it like this scenario:

1. Tesla hits 200,000 milestone in June 2019 (all 200,000 vehicles are legible for the full tax credit)
2. Tesla sells N vehicles in the subsequent quarters during which the phaseout still applies (all N number are eligible, at varying amounts of the tax credit)
3. Tesla sells X vehicles after all qualifying quarters have elapsed until just before the bill passes (none of X is eligible for any federal tax credit amount)
4. The bill passes/takes effect on date D and applies for all vehicles beyond 200,000+N+X
5. Tesla sells Z vehicles starting on date D (400,000 of which are fully eligible for the 7,000 tax credit, plus whatever sells in the subsequent quarter following the 400,000 milestone, and half the tax credit for the second quarter after the milestone)

The main question still to be clarified is what is date D, and does it start retroactively at the beginning of the calendar year of the bill passing for easier tax filing.
 

Magellan55

Member
Aug 30, 2018
376
350
Chapel Hill, NC
I think it would be difficult to track whether individuals bought a car on or after date "X" in the middle of a year, though they could always ask for the sales contract (which the IRS didn't do the last time). More likely they will give the tax credit to anyone buying an EV in the year the law was passed, so they only have to track when Tesla starts and stops counting the 400,000 vehicles sold. That means they will give out more than 400,000 tax credits for Tesla and GM. But that's what happened the last time too, when they blew past the 200,000 in the first part of the quarter and continued to get full tax credits for several more months.

Maybe just wishful thinking :)
 

TexasPete

New Member
Mar 11, 2021
2
0
Castorville
Like ct101 said, this is nowhere near finalized but nonetheless on the horizon. I imagine if/when this comes to fruition, Elon will raise the prices of the vehicles to compensate so I wouldn't go cancelling your orders just yet. Also, Biden is pro-minority and low-income, so chances are any of you with decent earnings won't be able to take advantage of it with whatever constraints he'll apply. And, nothing in the summary talks about $7k and the only income/price limits are related to pre-existing electric cars; it reads:

Sec. 402. Credit for previously-owned qualified plug-in electric drive motor vehicles (§25E). The provision creates a new refundable credit for buyers of used plug-in electric cars from date of enactment through 2026. Buyers can claim a base credit of $1,250 for the purchase of qualifying used EVs, with additional incentives for battery capacity. The credit is capped at the lesser of $2,500 credit or 30% of the sale price. To qualify for this credit, used EVs must generally meet the eligibility requirements in the existing Section 30D credit for new EVs, not exceed a sale price of $25,000, and be a model year that is at least two years earlier than the date of sale. Buyers with up to $30,000 ($60,000 for married couples filing jointly) in adjusted gross income can claim the full amount of the credit. The credit phases out so that buyers with below $40,000 ($70,000 for married couples filing a joint return) in AGI may be eligible for a reduced credit.
IMHO....Not sure Tesla will get a large (400,000) allotment since the Big 3 are struggling with sales and now have autos to try to dump into the market. This is the toughest part of buying a market dominating product...everyone is against Tesla, just check out why they are not allowed to have traditional dealerships in most states which I find asinine...but it works for them. Tesla Stores: What Are They and How Are They Different Than Dealerships?
 

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