GOP tax reform bill would end the $7500 EV tax credit (and other tax related grousing and grumbling)

[RVD98072]

When you leased your Model S, the rebate came off the price of the car upfront. Unless you got cheated.

With Tesla leases, you kind of get cheated.

They don't take the $7500 credit off the purchase price directly in the form of a cap cost reduction or anything like that (which is what most car leases do).

Instead they add it to the residual.

The math sort of works out in that you're still getting the $7500 benefit over the lifetime of your lease in the form of reduced lease payments.

But you don't get all of it if:

1) You sell your lease 3rd party partway through
2) You total your car before lease end
3) You buy your car at lease end (then you are paying all of it back)

And of course you lose out on the time value of the $7500 (leassor gets it with their taxes and only gives you a little bit of it month by month so they get a "free" loan from you

But then again, with a lease you're also only paying sales tax on your monthly payments, not the entire car.

 

[Shygar]

Maybe I will buy a Bolt this year and let the model 3 quirks get fixed. I honestly have been telling myself that buying a M3 this early with a new product wasn't wise only to convince myself it was worth the risk with $7,500 credit. Since that's gone, I really ought to wait. I would like to buy the Tesla eventually, but I think waiting might be prudent.

It's not gone yet, just being proposed. There are a lot of people upset at this (halving the mortgage interest deduction) so who knows if it will even get out of the house by the end of this year.

But keep calling your congressmen/women. It really does work.

 

[insaneoctane]

It's not gone yet, just being proposed. There are a lot of people upset at this (halving the mortgage interest deduction) so who knows if it will even get out of the house by the end of this year.

But keep calling your congressmen/women. It really does work.

Maybe I'm in a "glass is half empty" mood brought on by the Tesla email last night compounded with this news, but my first call was to my Chevy dealer.....

 

[ModelNforNerd]

My new plan...Maybe

Sell my Audi to my lined up cash buyer.

Used(or floor model) Model S until the AWD/Performance option is available.

Trade in the S against the 3, which in my state gives a significant sales tax savings.

 

[ohmman]

the special interests of Detroit, Texas, and every taxpayer who ISN'T buying an electric car…

Except that those taxpayers are on the hook for external expenses associated with the ICE that would have been supplanted by the EV.

 

[Petra]

Except that those taxpayers are on the hook for external expenses associated with the ICE that would have been supplanted by the EV.

It's amazing how some people choose to believe that externalities don't exist...

 

[Snow Drift]

Maybe I will buy a Bolt this year and let the model 3 quirks get fixed. I honestly have been telling myself that buying a M3 this early with a new product wasn't wise only to convince myself it was worth the risk with $7,500 credit. Since that's gone, I really ought to wait. I would like to buy the Tesla eventually, but I think waiting might be prudent.

It's not gone yet. This is just the offer by the House. The Senate will put out their version and then a final compromise will be met.

I can see the other OEMs pushing to get the EV credit back. They have spent $ to produce PHEV and BEV cars (CARB won't lower their requirements) and don't need another reason for that inventory to go stale on dealer lots. While they don't go out of their way to promote the cars at dealers, they like gov't sponsored ways to entice customers to buy inventory.

 

[flamingoezz]

This is what Elon gets for leaving Trumps council

I don't know how this can be spun as a positive for tesla going forward...sure it helped them launch the brand, but they are fully invested in electric. without incentives, ICEs become more attractive. I can see a TON of reservations being cancelled to go for less expensive ICE alternatives -- brands which aren't heavily invested in electric and can just take a loss on R&D if they so choose.

If it gets passed, watch tesla stock drop and ICE brands go up, up up!


and the worst part of this all -- is almost all people who got an EV credit are those who can afford 100K+ cars. finally the trickle down comes to the middle class folk, and it gets pulled.

 

[Qbenjamin]

This is what Elon gets for leaving Trumps council

I don't know how this can be spun as a positive for tesla going forward...sure it helped them launch the brand, but they are fully invested in electric. without incentives, ICEs become more attractive. I can see a TON of reservations being cancelled to go for less expensive ICE alternatives -- brands which aren't heavily invested in electric and can just take a loss on R&D if they so choose.

If it gets passed, watch tesla stock drop and ICE brands go up, up up!


and the worst part of this all -- is almost all people who got an EV credit are those who can afford 100K+ cars. finally the trickle down comes to the middle class folk, and it gets pulled.

I don't expect this to be passed in it's current form, the EV lobbyist will be out in full force to prevent this from happening. It's unfortunate, but I'm pretty sure that a substantial amount of M3 reservists will now look to cancel if the $7.5K tax credit is no longer there.

 

[David29]

With Tesla leases, you kind of get cheated.

They don't take the $7500 credit off the purchase price directly in the form of a cap cost reduction or anything like that (which is what most car leases do).

Instead they add it to the residual.

The math sort of works out in that you're still getting the $7500 benefit over the lifetime of your lease in the form of reduced lease payments.

But you don't get all of it if:

1) You sell your lease 3rd party partway through
2) You total your car before lease end
3) You buy your car at lease end (then you are paying all of it back)

And of course you lose out on the time value of the $7500 (leassor gets it with their taxes and only gives you a little bit of it month by month so they get a "free" loan from you

But then again, with a lease you're also only paying sales tax on your monthly payments, not the entire car.

Even though I leased, I have to admit I never really understood exactly where that $7500 shows up in the lease calcs. It was never shown explicitly in any documents I got. So, I am suspicious of when/how it ever benefitted me and my lease terms. I will keep in mind your comment about losing the benefit of it when I decide whether to buy the car at the end. At this point, I am not sure what I will do, but my car has been free of most of the problems I have read about, and has some features that are no longer available. I have a Model 3 on reservation, but it is beginning to look risky to assume delivery by September 2018 when the lease ends....

 

[voip-ninja]

It's not gone yet, just being proposed. There are a lot of people upset at this (halving the mortgage interest deduction) so who knows if it will even get out of the house by the end of this year.

But keep calling your congressmen/women. It really does work.

I can see why it's on the chopping block. It's low hanging fruit and, to date, most of the rebate has been used by people buying expensive luxury cars, not basic transportation where the credit was possibly originally intended.

As to the mortgage interest deduction... it's already capped at $1M and they are proposing capping it at $.5M. Do you propose it should stay at the higher amount or that there should be any cap at all?

This is a balancing act... getting the budget and taxes under control without enraging too many people.

Unfortunately you can't curtail or eliminate any tax credit or entitlement without enraging somebody.

The majority of the people who will be furious about both the mortgage interest deduction being reduced AND the EV tax credit evaporating live in states that will never vote in a GOP member anyway so it's not like they've got much to lose there.

 

[omgwtfbyobbq]

It is strange how an individual can be discriminated against based on how hard they work and the financial benefit of that hard work.

It's a progressive (in the economic sense) rebate, just like income tax is a progressive tax. So.. yeah. And sure, if everything else was equal, how hard you worked would be proportional to financial benefit. IRL, everything else is not equal.

 

[gregincal]

I can see why it's on the chopping block. It's low hanging fruit and, to date, most of the rebate has been used by people buying expensive luxury cars, not basic transportation where the credit was possibly originally intended.

As to the mortgage interest deduction... it's already capped at $1M and they are proposing capping it at $.5M. Do you propose it should stay at the higher amount or that there should be any cap at all?

This is a balancing act... getting the budget and taxes under control without enraging too many people.

Unfortunately you can't curtail or eliminate any tax credit or entitlement without enraging somebody.

The majority of the people who will be furious about both the mortgage interest deduction being reduced AND the EV tax credit evaporating live in states that will never vote in a GOP member anyway so it's not like they've got much to lose there.

I didn't see him having an opinion one way or the other about the mortgage deduction, he just pointed out that it presents a barrier to adoption of the bill, and could be enough to kill it because the lobby is strong. I assume the part about contacting your representative was purely in relation to the EV credit.

 

[voip-ninja]

I didn't see him having an opinion one way or the other about the mortgage deduction, he just pointed out that it presents a barrier to adoption of the bill, and could be enough to kill it because the lobby is strong. I assume the part about contacting your representative was purely in relation to the EV credit.

With the latest delay and other potential delays there's a good chance many of us who aren't already owners (people who already cashed in on the tax credit at least once *cough*) aren't going to get the entire thing anyway.

I was optimistic that I would get at least 50% of it if I got my car into Q4 next year and would definitely prefer to get the full credit.

On the plus side, losing the entire thing will make my decision to purchase AWD much easier, assuming it also isn't plagued with delays.

 

[Shygar]

I can see why it's on the chopping block. It's low hanging fruit and, to date, most of the rebate has been used by people buying expensive luxury cars, not basic transportation where the credit was possibly originally intended.

As to the mortgage interest deduction... it's already capped at $1M and they are proposing capping it at $.5M. Do you propose it should stay at the higher amount or that there should be any cap at all?

This is a balancing act... getting the budget and taxes under control without enraging too many people.

Unfortunately you can't curtail or eliminate any tax credit or entitlement without enraging somebody.

The majority of the people who will be furious about both the mortgage interest deduction being reduced AND the EV tax credit evaporating live in states that will never vote in a GOP member anyway so it's not like they've got much to lose there.

There are 14 republican congressmen in California that could very well affect people in their district. I'm not making any opinion about the mortgage interest deduction, simply stating that the forces against it are big and not happy.

I think the EV tax credit has been used for precisely what it was intended. Getting a lower cost electric car available. Tesla was going to hit that 200k limit very soon anyways, so the majority of model 3 holders weren't going to get the full amount anyways. So this is really going to affect companies like Chrysler with the Pacifica and other companies getting into the market. If all of a sudden their vehicles are more expensive than Tesla/GM/Nissan, then only those 3 will have a viable cheaper EV out there. Cutting it now reduces competition against those other companies that aren't quite there yet (but are on their way).

I still don't think it's going to pass in its current form. We'll see if the EV credit stays or goes in the end.

 

[cpa]

I wonder just how much Congress understands about the alternative minimum tax that is to be repealed by this bill.

The AMT consists of exclusion items and timing items. Included among the exclusion items are. . .

The deduction for personal exemptions, if any
The itemized deduction for taxes (state and local, property.)
The itemized deduction for most miscellaneous deductions subject to the 2% AGI threshold
The itemized deduction for excess mortgage interest not used to buy, build or improve one's home (usually through a refi and you pull cash out to buy your Tesla.)
Bond interest from certain Private Activity Bonds that are otherwise tax exempt

Exclusionary items are just that--they are excluded from being deducted for the calculation of AMT.

There are also timing items like. . .

The difference in depreciation expense between MACRS and AMT methods
Stock options that are deferred for regular tax but subject to AMT (unless a Section 83 election is filed.)
The percent-of-completion contract method profit that exceeds the completed contract method of profit for certain contractors.
A number of highly specific timing matters that likely affect a very minuscule number of taxpayers.

Any AMT associated with these timing matters is allowed as a credit in future years, so the taxpayer gets his money back, eventually.

Roughly fifty percent of my clients pay AMT because of California's high taxes on income and property. A few also have the 2% miscellaneous deductions and specified private activity municipal bond interest. In other words, when Congress proposes to eliminate those itemized deductions and AMT, I really do not think that there is going to be a material difference in the amount of tax collected.

But it makes for good sound bites and is viewed as a good thing by their constituents because their constituents don't understand how the AMT works either. But tax "repeal" is always worth lots of votes.

 

[dmode]

Tesla should be ramping up their lobbying efforts to retain the tax credit. They should have decent leverage, considering they employ 20,000 people in the US and many of them in domestic manufacturing. Also, their battery factory in Nevada is in a Republican district. Threats to move production to China can be a pretty good leverage.

 

[dhanson865]

The flat $7500 didn’t make sense in the first place, it should have been a percentage with a cap. I did take advantage of it a couple times just because it was offered and I could. After the last 8 years of reckless spending I hope now they rethink everything but passing common sense reforms are difficult with the opposition to ending any handout.

Having it scale with price could let a company sell a Smartfor2EV for $80,000 just to get more for it.

Having it a flat rate makes the discount more attractive the closer the car price is to competitive vs other cars of its size and capability.

There are plenty of ways it could be improved but scaling it with price with no regard to any other metric would be a mistake.

 

[tashtibet]

Thats what I’m afraid of. Is that a possibility?

most of the politicians depend on someone to pay/sponsor/donate to get reelected and the oil giants are paying them.

 

[Skotty]

What's most obnoxious about the tax reform is that they are cutting tax breaks to fund tax breaks. If they would just decrease spending overall, they could give a true genuine tax cut without increasing the deficit.