Model 3 : Clarification regarding Tax credit

[Sunil]

Hi,

I am migrating to California this December and planning a model 3. Need help in understanding if I can befit from $7500 tax credit.

Basically, I don't have any Tax liability this year till 2018 December.
Want to understand if I buy a model 3 this December, can I befit from the tax credit in next year ie from 2019 Jan.

Regards
Sunil

 

[spesler]

@Sunil
You would have to report a lot of income in December to generate a $7500 tax liability to be credited against - I’d guess at least $50k. You would probably be better off deferring the purchase to 2019 and getting the $3750 credit.

Please someone correct me if this is wrong.

 

[Dr. J]

Hi,

I am migrating to California this December and planning a model 3. Need help in understanding if I can befit from $7500 tax credit.

Basically, I don't have any Tax liability this year till 2018 December.
Want to understand if I buy a model 3 this December, can I befit from the tax credit in next year ie from 2019 Jan.

Regards
Sunil

Most taxpayers are on a calendar year and file their returns in the spring after the end of the tax year. So the return filed in early 2019 is the 2018 tax return.

I'm not sure what you're asking. If you don't have any income in 2018 until December, it will be a high hurdle (because of the new larger standard deduction amounts) to have $7,500 in tax liability to take full advantage of the credit.

 

[pkodali]

@Sunil
You would have to report a lot of income in December to generate a $7500 tax liability to be credited against - I’d guess in the neighborhood of $50k. You would probably be better off deferring the purchase to 2019 and getting the $3750 credit.

Please someone correct me if this is wrong.

This sounds about right

 

[Dr. J]

@Sunil
You would have to report a lot of income in December to generate a $7500 tax liability to be credited against - I’d guess at least $50k. You would probably be better off deferring the purchase to 2019 and getting the $3750 credit.

Please someone correct me if this is wrong.

You're not wrong, but there are so many unknown variables about @Sunil's tax situation that we can't give even ballpark numbers about income and tax liability, IMO.

 

[spesler]

@DrJ that is fair. I believe my estimate is close to the best case. With additional deductions, it takes more income to generate the needed liability.

 

[Sunil]

Thanks for the super-quick-responses.

Will delay my purchase to Jan 2019.

 

[ewoodrick]

Hi,

I am migrating to California this December and planning a model 3. Need help in understanding if I can befit from $7500 tax credit.

Basically, I don't have any Tax liability this year till 2018 December.
Want to understand if I buy a model 3 this December, can I befit from the tax credit in next year ie from 2019 Jan.

Regards
Sunil

First, let's make sure that you use the correct words. By Tax liability, that means that you will have not paid any US taxes this year. That does not mean that you won't have to pay when you file taxes next year. In general, taxes are taken out with each paycheck and that's what we are talking about.
If you indeed paid $0 taxes this year, then buying a car this year will result in no tax advantages.

If you will be paying taxes next year, then from Tesla, you can get a $3750 credit and for other EVs, sill $7500.

 

[Promo714]

Check with a CPA because mine told me the credit can be carried forward over several years and applied as needed to offset taxes owed in a given year until it is used up. A friend of mine had the same question as you and asked their CPA and was told the same thing I was told. If this turns out to be true for you then it means it would be better to take delivery in December for the full $7500.

 

[ItsNotAboutTheMoney]

Check with a CPA because mine told me the credit can be carried forward over several years and applied as needed to offset taxes owed in a given year until it is used up. A friend of mine had the same question as you and asked their CPA and was told the same thing I was told. If this turns out to be true for you then it means it would be better to take delivery in December for the full $7500.

Not a CPA, but that sounds like business use rules. Personal use is very clear: must be claimed for the tax year in which you started using it.

 

[ucmndd]

Check with a CPA because mine told me the credit can be carried forward over several years and applied as needed to offset taxes owed in a given year until it is used up. A friend of mine had the same question as you and asked their CPA and was told the same thing I was told. If this turns out to be true for you then it means it would be better to take delivery in December for the full $7500.

Only if a business expense. As a personal credit it can’t be carried forward.

 

[ewoodrick]

Check with a CPA because mine told me the credit can be carried forward over several years and applied as needed to offset taxes owed in a given year until it is used up. A friend of mine had the same question as you and asked their CPA and was told the same thing I was told. If this turns out to be true for you then it means it would be better to take delivery in December for the full $7500.

You may be thinking CA credits. I'm pretty sure fed can't

 

[Sunil]

First, let's make sure that you use the correct words. By Tax liability, that means that you will have not paid any US taxes this year. That does not mean that you won't have to pay when you file taxes next year. In general, taxes are taken out with each paycheck and that's what we are talking about.
If you indeed paid $0 taxes this year, then buying a car this year will result in no tax advantages.

If you will be paying taxes next year, then from Tesla, you can get a $3750 credit and for other EVs, sill $7500.

As you mentioned, other EVs are on option. But my heart is with Elon...

 

[EVDRVN]

Not a CPA, but that sounds like business use rules. Personal use is very clear: must be claimed for the tax year in which you started using it.

That is for business use only personal will not carry. One way to get the liability is if you have a Sep IRA or other holdings and move it to a Roth etc. This is a good way to go as you get the credit you would pass up and it is in a Roth which would have other benefits. Consult a tax person for these options.

 

[BluestarE3]

As you mentioned, other EVs are on option. But my heart is with Elon...

I'm with you there! If it were just the Federal Tax Credit, I would have just gotten a Chevy Bolt last year.

 

[Austindude]

That is for business use only personal will not carry. One way to get the liability is if you have a Sep IRA or other holdings and move it to a Roth etc. This is a good way to go as you get the credit you would pass up and it is in a Roth which would have other benefits. Consult a tax person for these options.

We have gone this route (converting a 401k to a Roth which made sense at my age, income, and tax situation) but be careful because this can move you into other tax brackets. You should speak to your accountant before you make any decisions

 

[kaffine]

It is a federal credit so if you have federal tax liability of $7500 or more you can claim it. However since you used the word migrating not just moving I am guessing you are coming from another country not another state so no federal tax liability.

I think California has some state rebates as well but I don't know what rules apply to them.

 

[EVDRVN]

We have gone this route (converting a 401k to a Roth which made sense at my age, income, and tax situation) but be careful because this can move you into other tax brackets. You should speak to your accountant before you make any decisions

If you have no obligation you do this, it makes no sense to do if you do not have an obligation. Clearly if you have the $7500K obligation post deductions then there would be not point to move funds. This is a strategy for those that need to increase their taxable income.

 

[kmaluo]

To clarify, if Line 63(Total Tax) on my 1040 is more than $7,500, then I will get the full $7,500 credit?

 

[BluestarE3]

To clarify, if Line 63(Total Tax) on my 1040 is more than $7,500, then I will get the full $7,500 credit?

On the 2017 Form 1040, the amount on line 47 is used to calculate the amount of your EV tax credit. Not sure about 2018 since much has changed.