Model 3 monthly Payment?

[DR61]

Tesla estimates that we can take delivery in the first quarter of 2018. We, probably unlike most here, are of the age where we can make traditional IRA withdrawals without penalty. We have accumulated a large amount in our IRAs. Therefore we plan to take out most of the cost of the Model 3 purchase from our IRAs, and instead of choosing to withhold 25% (our marginal tax rate) for federal taxes, we can withhold only 10%, thereby in effect getting the entire tax credit before our purchase.

We will not need to finance any amount, but will consider it if rates are extremely low.

 

[smak]

It is true however, that each person has to decide what to do with the $7,500 (or more from state)

Not everybody has $7,500 extra to put down on the car, to lower your payments as if you already have the $7,500.

If you don't, you'll have to start with payments not based on your tax credit, and then when you get it, decide if you want to put it all towards your car payment.

This becomes more difficult if you have an early 2018 produced car, since you would have to wait a year tro get the money

If you get a loan of 2.74%, or better, that's a pretty cheap %, and maybe using the $7,500 for something else might be wiser?

 

[ncsmith4]

Liability vs withholding is pretty simple. Liability is how much you owe. Withholding is how much you choose to take out of your paycheck each month. If you calculate it perfectly, at the end of the year your liability would equal your withholding, and you wouldn't owe any money or get a refund. If liability > withholding, you owe money. If liability < withholding, you get a refund back.

The EV tax credit reduces your liability. If, for example, your liability is $7500 in the year you purchased the EV, it would get reduced to $0. The amount of refund you get would be exactly the same as your withholding. The only tricky part is that the refund will never reduce your liability to less than 0 - you will never get more money back then you paid in.

Thanks!

 

[SageBrush]

Thanks!

Runt8 has it exactly right.

I phrase it a bit differently: pre-payments do not affect tax liability or tax credits, they just affect the final accounting with the IRS, which is:
(Liability - tax_credit ) - pre-payments
Where (liability - non refundable tax credit) is not less than zero
Negative results means money to you, positive means money to the IRS