Federal tax credit when moving to the US

[Wanderer]

Hi everyone,

I am about to move to the US and intend to get the Model S as my car. Very excited about it!

I am not entirely sure when exactly I will "officially" be in the US from a tax perspective as it depends on how long it takes to get my visa and such sorted out. I would expect it to take 2-3 months.

Does anyone know if it matters when the car is delivered when it comes to getting the federal tax credit? In other words, if the car is delivered before I am officially based in the US, can I still get the tax credit at year-end? I would expect to only pay US taxes from the time I am based in the US, but and am not clear whether that also impacts any credits I may include in my return.

I am struggling with timing the delivery and my move and it would help if I can decouple both. I am regularly in the US currently so could potentially take delivery earlier.

Thanks,

John

 

[Max*]

Not sure about your question, but just wanted to point out that you'd need to pay $7,500 in taxes to be eligible for the full $7,500 credit. So that means, if you only start working in the US late in the year and don't pay $7,500 in taxes, you wont get the full credit.

 

[Wanderer]

Thanks, Max. Understood. I would expect to move in the May-June timeframe and would expect to still owe more than $7,500 in taxes.

 

[cpa]

To my way of thinking, your eligibility for taking the credit will hinge upon when you are subject to United States income taxes as compared to when you took delivery of your vehicle, everything else being equal. But this would be yet another facts-and-circumstances test, and the burden of proof is upon the taxpayer.

You do not furnish enough information with your question for someone to give you a more accurate response. Do you currently pay United States income taxes on form 1040NR? Are you going to be a permanent resident and apply for a green card? Do you have worldwide income that you will be including on your 1040 for 2016? If so, will you be paying income taxes and claiming the foreign tax credit? Generally United States residents pay income tax on their worldwide income, and then claim a foreign tax credit for taxes paid to other countries. That credit is deducted from your United States income tax liability before the $7,500 EV credit is considered. Bear in mind that I am not an expert when it comes to the taxation of foreign nationals.

You really should speak to an income tax professional who has a good understanding of your particular situation. DO NOT rely on me,TurboTax or any of its ilk.

Enjoy your car!

 

[mrElbe]

If this will be the first time you will be paying income tax in the US, you can select a fiscal tax year instead of a calendar tax year.

 

[Wanderer]

Thank you all for your feedback.

@cpa I am not not sure about some of the terms you use as I am new to American taxes. I am currently paying taxes in Switzerland and would expect to do so until I move in a couple of months. I would then expect to pay taxes in the US from the moment I am a US resident (and on the US payroll). From previous international moves, my experience is that you only start paying taxes in the new country from the moment you are a tax resident in that country. In other words, I would not expect to have my Swiss income count towards my American taxes as it will be before I am resident in the US. The core of my question is whether the same also applies to tax rebates and I can only request a rebate if I take delivery after I am a resident or if that does not matter.

@mrElbe being able to define the fiscal tax year may help with this situation.

Happy to reach out to a professional. One of my challenges is that I am not sure where to find such a professional as I am completely new to US taxes.

 

[cpa]

Thank you all for your feedback.

@cpa I am not not sure about some of the terms you use as I am new to American taxes. I am currently paying taxes in Switzerland and would expect to do so until I move in a couple of months. I would then expect to pay taxes in the US from the moment I am a US resident (and on the US payroll). From previous international moves, my experience is that you only start paying taxes in the new country from the moment you are a tax resident in that country. In other words, I would not expect to have my Swiss income count towards my American taxes as it will be before I am resident in the US. The core of my question is whether the same also applies to tax rebates and I can only request a rebate if I take delivery after I am a resident or if that does not matter.

@mrElbe being able to define the fiscal tax year may help with this situation.

Happy to reach out to a professional. One of my challenges is that I am not sure where to find such a professional as I am completely new to US taxes.

You should ask for referrals once you get settled stateside. The chances are quite good that your employer would be able to make a recommendation or two. I assume that your employer is a multi-national company; accordingly he would have a domestic accounting firm to assist in US taxation and accounting.

Regarding splitting your income, you are correct that your Swiss income earned before you make your move will be excluded. However, you could easily have other Swiss sources of income (like rents, interest, business ownerships, pensions) that should be included post-move. We now have some complex reporting on foreign bank accounts, fiduciaries and investments. There are a number of IRS forms that must be completed if a taxpayer has ownership or signatory interests in these sorts of things, plus a Treasury form 114 that goes directly to the United States Treasury, bypassing the IRS. The penalties for non compliance are staggering.

I would hazard a guess (emphasis on guess) that the timing of ownership of your Tesla will be the overriding factor in receiving the $7,500 income tax credit.

(And a small nit to pick, perhaps lost in translation from French/Italian/German: the reduction in your federal income taxes is considered an income tax credit, not a rebate. Generally in American English a rebate is received directly from the entity that you paid to purchase something. A rebate is paid after purchase; a discount is credited at the time of purchase.)

Welcome to the good ole' US of A!