IRS weighs in on tax rebate, mostly bad news for Model Y

[texas_star_TM3]

I am not a tax expert. I just use Turbo Tax for my tax stuff, so please educate me:
This is from IRS EV tax credit page:
View attachment 895239

if your tax liability (not taxes paid...) is less than $7500 - you won't get the full credit. if you make more than $150k / $300k you won't qualify at all.

 

[texas_star_TM3]

Ok, this is common misconception about the EV Credit. The term has nothing to do with owing money in Apri, or your refund check from overpaying in taxes. The credit can be received in full, or partially:

If the EV credit max is $7,500: Non-Refundable Credit means if your Federal Total Tax liability was only $7,000, then you can only receive a $7,000 credit. The $500 credit that you could not utilize is GONE, it cannot be refunded to you. Some federal credits ARE refundable and any portion which you didn't utilize is sent to you regardless.

For my 2018 tax return, when buying my Model 3, I got a refund check for $12,000....$7,500 EV credit + $4,500 from the IRS from overpaying taxes.



1) AGI has nothing to do with Total Tax liability. We are explaining how that works. AGI is a separate requirement. Anyone making $50k or more is probably paying $7,500+ in Federal total taxes.

2) Leases - If you lease an EV, the lease company gets the credit and they apply the benefit to you, the leasee. They either give it to you as downpayment cash (not Tesla) or they use the money to inflate your resale value (reduces depreciation), which lowers your monthly payment. So yes, you get a benefit as a leasee.

2) simply not true. not true at all. The lease company isn't qualifying for tax rebates at a corporate level.

 

[CHILLIBAJJI]

I am not a tax expert. I just use Turbo Tax for my tax stuff, so please educate me:
This is from IRS EV tax credit page:
View attachment 895239

how you pay taxes doesn't matter - pre-pay using payroll or pay quarterly or pay at the time of filing...

EV credit is a CREDIT ... like coupon.... it's applied to your tax burden.

non-refundable aspect speaks to - if your tax burden is ZERO or less than 7500.. you still won't get money back from IRS..

similar to how the language is on a coupon - you can't take the coupon to store and get it's cash value.. it's applied only if you buy something.. at the max you can get item for FREE .. but nobody is paying you money to get that item beyond FREE.

 

[DrGriz]

I am not a tax expert. I just use Turbo Tax for my tax stuff, so please educate me:
This is from IRS EV tax credit page:
View attachment 895239

You are correct. Because it is nonrefundable, the credit can only be used against any tax liability you have. So only those who have a tax liability will benefit.

 

[Snow Drift]

2) simply not true. not true at all. The lease company isn't qualifying for tax rebates at a corporate level.

It is entirely true.

Tesla inflates residual on EV leases (when the credit existed for Tesla)

I leased a Subaru Crosstrek PHEV. That got a $4,502 EV credit. Subaru Financial got the credit, they gave me $4,502 off as downpayment. That reduced my lease price.

That's how EV leases work. Some companies, I think Hyundai/Kia, steal the credit from you completely.

 

[Pricedm]

This is really excellence news.

Now I’m really curious if we’ll see more downward pressure on prices for other EVs? The price of the Mach E has to be considered nuts now, but I’m also curious if the ID4 will drop considerably.

MSRP $66,275 as of 1/13/2023 for Ford MachE “premium” with AWD Extended battery.

Very telling that this isn’t the first vehicle listed under Ford’s “electrified” section on their website.

Any bets on when price drops to under $55k for this spec?

 

[nate704]

MSRP $66,275 as of 1/13/2023 for Ford MachE “premium” with AWD Extended battery.

Very telling that this isn’t the first vehicle listed under Ford’s “electrified” section on their website.

Any bets on when price drops to under $55k for this spec?

Don't forget the dealer mark ups.

 

[Kokukenji]

Don't forget the dealer mark ups.

This. People thinking that dealerships will price down aggressively like Tesla is going to be in for a surprise. Ford can lower the MSRP but doesn't mean all dealerships will follow suit. They can always say they didn't get allocation and still mark it up above list price.

 

[Daekwan]

This. People thinking that dealerships will price down aggressively like Tesla is going to be in for a surprise. Ford can lower the MSRP but doesn't mean all dealerships will follow suit. They can always say they didn't get allocation and still mark it up above list price.

And people can always just skip buying that vehicle... from that specific dealer.

It's not like someone is ever holding a gun to your head and forcing you to buy that Mach-E with the $10K dealer markup.



Personally, I will never pay over MSRP. For anything. There is just nothing I need brand new.. that badly.. to pay more than what it technically 'cost'. There will always be people who make bad financial decisions.. simply because they do not want to wait for a better deal. Many consumers have shown they are just fine with paying a premium to have things first.. or skip the waiting line to buy. And there will always be a dealership willing to take the money, those customers are anxious to hand over.

 

[Kokukenji]

And people can always just skip buying that vehicle... from that specific dealer.

It's not like someone is ever holding a gun to your head and forcing you to buy that Mach-E with the $10K dealer markup.



Personally, I will never pay over MSRP. For anything. There is just nothing I need brand new.. that badly.. to pay more than what it technically 'cost'. There will always be people who make bad financial decisions.. simply because they do not want to wait for a better deal. Many consumers have shown they are just fine with paying a premium to have things first.. or skip the waiting line to buy. And there will always be a dealership willing to take the money, those customers are anxious to hand over.

For sure but that's if everything is perfect, which nothing is. It's great that you're able to move swiftly within the market but general pop is not as good as you.

 

[cusetownusa]

if your tax liability (not taxes paid...) is less than $7500 - you won't get the full credit. if you make more than $150k / $300k you won't qualify at all.

Is the income limit based on 2022 AGI or 2023? I am assuming 2023 but unfortunately that would make it a big unknown if I would qualify until the 2023 year is over.

 

[Snow Drift]

Is the income limit based on 2022 AGI or 2023? I am assuming 2023 but unfortunately that would make it a big unknown if I would qualify until the 2023 year is over.

It is based on the tax-year of purchase.

Purchased before, by 12/31/2022 (2022 Tax Year, aka April 15 2023 filing)
Purchase now (2023 Tax Year, aka April 15 2024 filing)

 

[MP3Mike]

Is the income limit based on 2022 AGI or 2023?

Yes.

I am assuming 2023 but unfortunately that would make it a big unknown if I would qualify until the 2023 year is over.

You can qualify based on the MAGI in the year of purchase, or the prior tax years MAGI.

 

[texas_star_TM3]

For sure but that's if everything is perfect, which nothing is. It's great that you're able to move swiftly within the market but general pop is not as good as you.

Supply and demand. When ford dealers aren’t selling the Mach E … why would they still mark it up then? This Tesla fanboy fantasy that competition will intentionally price comparable products over 10k above the model Y and add markup on top is delusional… ford and VW will likely heavily incentivize with rebates over the next few months…

 

[cusetownusa]

It is based on the tax-year of purchase.

Purchased before, by 12/31/2022 (2022 Tax Year, aka April 15 2023 filing)
Purchase now (2023 Tax Year, aka April 15 2024 filing)

Doh...although that is what I was assuming.

 

[nate704]

Supply and demand. When ford dealers aren’t selling the Mach E … why would they still mark it up then? This Tesla fanboy fantasy that competition will intentionally price comparable products over 10k above the model Y and add markup on top is delusional… ford and VW will likely heavily incentivize with rebates over the next few months…

because simply they don't have enough cars to meet the demand. Even with lower priced Tesla, Mach E will have mark ups because each dealer will only have one or two in their inventories, and there will be more than 1-2 people want them, hence the mark ups.

 

[DrGriz]

Yes.



You can qualify based on the MAGI in the year of purchase, or the prior tax years MAGI.

Whichever is lowest, from what I read.

 

[Kokukenji]

Supply and demand. When ford dealers aren’t selling the Mach E … why would they still mark it up then? This Tesla fanboy fantasy that competition will intentionally price comparable products over 10k above the model Y and add markup on top is delusional… ford and VW will likely heavily incentivize with rebates over the next few months…

Because Ford dealerships sells other cars. Dealerships are also not Ford direct so whatever Ford is doing is not always in sync with what their dealerships are doing. They can hide the couple of Mach E they have and sell to the highest offer by fabricating supply issue. It's not that out of this world.

In the end, it's good that competition are heating up tho, especially for new buyers.

 

[alexcue]

It is entirely true.

Tesla inflates residual on EV leases (when the credit existed for Tesla)

I leased a Subaru Crosstrek PHEV. That got a $4,502 EV credit. Subaru Financial got the credit, they gave me $4,502 off as downpayment. That reduced my lease price.

That's how EV leases work. Some companies, I think Hyundai/Kia, steal the credit from you completely.

add Toyota to the mix...

 

[ucmndd]

This. People thinking that dealerships will price down aggressively like Tesla is going to be in for a surprise. Ford can lower the MSRP but doesn't mean all dealerships will follow suit. They can always say they didn't get allocation and still mark it up above list price.

The “problem” fueling this phenomenon is that no other manufacturer has hit a production scale that meets demand. Mach Es and Lightnings are still relatively scarce because Ford can’t make enough of them. So the people who really want them are still competing for limited stock, giving the dealer pricing leverage.

Tesla on the other hand can crank out a million Model Ys, and if they have any hope of selling them all, they need to be responsive to the market.