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

[Kokukenji]

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.

Yeah, I see the same issue. Tesla has 4 models. Ford has a lot more and majority are still ICE vehicles. You can't scale one without descaling the other. Are they ready to do that? Same question as before and with their existing infrastructure, I don't think so, not yet.

Toyota came out and said that they are not ready. I don't even know what the lead time is on their "Prime" trim for their plug in hybrid, that's not full on EV. Sure, their concept cars and goals are cool but how does that relate to consumers wanting to buy an EV from them today?

Tesla is ahead because these cars are their business. EV is their business. (My personal pricing regrets aside) It's good to see them react to the market quickly.

 

[electricar]

They still make a profit at this price point. If the factories aren't cranking out cars they turn into Elon's nightmare - Money Furnaces. He just lost more money than any other human being ever as his Tesla shares ( as well as mine ) tanked and this is a bold move that makes me think has has gotten his thinking straight and is back at the helm of Tesla. After all he could lose all the money he has stuffed into Twitter and it would be a minor inconvenience compared to Tesla tubing out.

 

[Daekwan]

They still make a profit at this price point. If the factories aren't cranking out cars they turn into Elon's nightmare - Money Furnaces. He just lost more money than any other human being ever as his Tesla shares ( as well as mine ) tanked and this is a bold move that makes me think has has gotten his thinking straight and is back at the helm of Tesla. After all he could lose all the money he has stuffed into Twitter and it would be a minor inconvenience compared to Tesla tubing out.

Yep. And even if the vehicles are sold at a loss.. it can be used a loss leader to gain revenue in other areas. For example Supercharging, software upgrades, parts & services, warranty programs, solar, Powerwall, even virtual energy supplier etc. Seems like it was popular to think Tesla isn’t just a car company when the stock price was flying up. Why has that sentiment changed?

If I’m Tesla I want produce and sell as many vehicles as possible right now. It’s what I do best. And it’s a game changing experience for my end customer. The idea is get them hooked on the EV drug.. and sell them everything else piece by piece.

This is exactly what Apple does best with the iPhone. Doesn’t take long before the typical iPhone user gets an iCloud storage subscription, iPad, Watch, MacBook and spends money in online store on apps, music, media, news, fitness, etc.

 

[woolymammoth17]

Most people lease luxury cars. Either way, $7,500 in Federal Total Tax liability is tiny. Just about everyone pays more than that in Federal taxes. So, if you want to buy the car, you will get $7,500 either as a check, or to reduce your tax liability due in April.

AGI is another topic.

This is not accurate. More than 50% of the population pays no federal income tax, and you have to earn ~$65,000 to have a $7,500 tax liability. The range for a single person is ~$65,000 to $150,000 to be eligible for the entire tax credit.

 

[Snow Drift]

This is not accurate. More than 50% of the population pays no federal income tax, and you have to earn ~$65,000 to have a $7,500 tax liability. The range for a single person is ~$65,000 to $150,000 to be eligible for the entire tax credit.

What % of approved Tesla buyers do you think don't have a $7,500+ tax liability?

 

[woolymammoth17]

What % of approved Tesla buyers do you think don't have a $7,500+ tax liability?

I was just responding to you saying almost everyone has a $7,500 tax liability.

But to your point, Thinking logically you would assume not many. But in my personal experience, I see many people getting Tesla's that likely do not have a $65k+ steady W2 job. Also a lot of self employed people, for various reasons, actually bring home a lot of money but show losses on their tax returns.

 

[jcanoe]

If you don't earn at least ~$65k to qualify for the full $7,500 tax credit you can still claim a portion of the tax credit. I don't believe you can roll over any used portion of the tax credit to the following year(s).

Unless the tax rules have changed you can convert a portion or all of a traditional IRA into a Roth IRA. The Roth conversion generates income that will be entered on your federal tax return. This would increase your taxable income so you could qualify for the full $7,500 tax credit and also works for someone who is retired to take advantage of up to the $7,500 new electric vehicle tax credit or up to the $4,000 used electric vehicle tax credit. Always consult your tax advisor.

 

[electricar]

Well it worked - we just ordered a Model Y

 

[Snow Drift]

The IRS must be mistaken. The MY is an SUV, all versions. Seats don't change it's classification.

MME is $55k also. Maybe they think it is a coupe lol?

The VW ID.4 AWD is considered an SUV, but not the RWD.

Model Y 5 seater is an SUV... IRS made a mistake:

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

Tesla Model Y gains full access to $7,500 EV tax credit with new $80,000 price limit

Tesla Model Y, which is undoubtedly the most important EV this year, has gained full access to the $7,500 federal tax credit with a new $80,000 price limit.

electrek.co

 

[norcalbowler94]

Model Y 5 seater is an SUV... IRS made a mistake:

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

Tesla Model Y gains full access to $7,500 EV tax credit with new $80,000 price limit

Tesla Model Y, which is undoubtedly the most important EV this year, has gained full access to the $7,500 federal tax credit with a new $80,000 price limit.

electrek.co

Wow!

 

[Spinkick]

Wonder how leases are handled.

 

[Silicon Desert]

I was just responding to you saying almost everyone has a $7,500 tax liability.

But to your point, Thinking logically you would assume not many. But in my personal experience, I see many people getting Tesla's that likely do not have a $65k+ steady W2 job. Also a lot of self employed people, for various reasons, actually bring home a lot of money but show losses on their tax returns.

I see you responding to someone else. YUP, agree, and you could say I have been in a couple of the categories you mentioned. Last many years being retired and on social security, yet have 2 Teslas, I have almost no tax liability every year. HOWEVER, I will be able to take the $7,500 fed credit for the Lyriq that the wife bought. I'm guessing only a very few people would figure out how I am able to do that

 

[jcanoe]

If you don't have the full $7,500 Federal income tax liability for 2023 but you did in 2022 you may be eligible for the EV tax credit. (Not sure if this is still the case under the new inflation reduction act.)

You can generate taxable income by converting part of a conventional IRA to a Roth IRA; convert just enough of the IRA to a Roth that results in $7,500 Federal income tax. (This strategy may generate State income tax in the state where you reside.)

 

[tangible1]

leases, especially commercial leases are interesting.
the lessor (owner) can take the full tax credit, regardless of income, etc etc.
the person leasing the vehicle doesn't need to prove anything.....but can get the tax advantage anyway, based on what the lease contract terms are.
in other words, the lessor can choose to pass on the tax credit....or not....or some percentage of it....etc.

this leaves an opening for lots of competition on the lease side.

 

[Spinkick]

leases, especially commercial leases are interesting.
the lessor (owner) can take the full tax credit, regardless of income, etc etc.
the person leasing the vehicle doesn't need to prove anything.....but can get the tax advantage anyway, based on what the lease contract terms are.
in other words, the lessor can choose to pass on the tax credit....or not....or some percentage of it....etc.

this leaves an opening for lots of competition on the lease side.

Tesla isnt passing it on...are they?

 

[tangible1]

Tesla isnt passing it on...are they?

i have not checked; I own mine outright.

 

[Spinkick]

i have not checked; I own mine outright.

Okay, just checking if it changed recently. When I picked up my Y, they were not passing it on.

 

[Snow Drift]

Tesla isnt passing it on...are they?

Okay, just checking if it changed recently. When I picked up my Y, they were not passing it on.

How are you determining that?

In the past, Tesla DID pass on the credit. They did so by inflating the residual value of the car. This means you have less depreciation, and therefore your lease payments are less. I assume this has continued in 2023.

Other companies, example Subaru, itemize the $7,500 on your paperwork as a downpayment. This lowers the capitalized cost of the car, and again, lowers your payment.

Hyundai/Kia used to take the credit and give you nothing.

The Subaru way is more transparent, because it is there in ink on your lease agreement. In the end, they both help the customer.

 

[Spinkick]

Well, because I first set up the lease when I ordered the car in feb, and they said they arent passing the lease on.

 

[dgatwood]

This is not accurate. More than 50% of the population pays no federal income tax, and you have to earn ~$65,000 to have a $7,500 tax liability. The range for a single person is ~$65,000 to $150,000 to be eligible for the entire tax credit.

Yes, only about 38% of the U.S. population earns $65k or more. One caveat, of course, is that as a percentage of Tesla owners, the overwhelming majority make more than that. And that's actually true for new car buyers in general, whether Tesla or not.

A $65,000 car, assuming a 3% loan, would cost $14,015.52 per year over five years. If you can manage to get an 84-month loan, it is still $10,306. That puts it out of range of anyone who can't afford to spend $10,306 per year plus the sales tax, which could easily add another $5k to the first-year cost. So think for a moment about how much money you would have to earn to have $15,000 in savings or disposable income....

In 2015, the average income of new-car buyers was $80,000. I read somewhere that this number is over $120k now, but I can't confirm that with any certainty. And whopping 64% of people who buy battery electric vehicles earn over $75k.

Given how much the price of new cars has skyrocketed over the past couple of years, most people earning significantly below $65k per year are not seriously considering buying any new car of any kind in the current market, much less a Model Y at ~$55K.

So although it is true that most people don't earn enough money to qualify for the full discount, most people who would even contemplate buying a car that is so expensive probably do, and in all likelihood, more than half make too much to qualify....