That is true. I just want to make sure people don't get the wrong idea about how the tax credit actually works.
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That is true. I just want to make sure people don't get the wrong idea about how the tax credit actually works.
This is in contrast to a conversation I had with the Dallas gallery people. The staff at the Dallas gallery said that they probably wouldn't be able to take reservations until after the unveiling had occurred, but they'd know more as the date approached. Clearly this was speculation, not news, so who knows who will be correct.
In regards to the bare bones and the tax credit... I'm a generally frugal guy and I just dont like spending that much money on a car (Model 3 will probably be the largest splurge of my life). Drove a Corolla for 11 years, and leased a Prius for $200/month in waiting for the 3. Honestly if it ends up costing much more than $35k I'll probably lease a car again waiting for the Model 3 used/cpo/loaner market to pop up. It will suck to wait, but I'll get there eventually, and perhaps they will have ironed out some issues by then.
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Yea, I'm too poor to get the credit (it will be a Herculean stretch just to afford the barebones M3). On the flipside, you better hope you're near a service center for any teething issues for those brand-spanking new M3s.
Those who think they don't make enough money to take advantage of the tax credit should consider drawing on their IRA's in amounts needed to take full credit. That is what I am doing for buying 2 M3's (highly optioned to ensure greatest possibility of early delivery of course, for whatever it is worth).
I know of 23 people just in my city that are planning on going to the nearest store to put down deposits and over 30 people at my company. Take this and apply all over the world..... The # of deposits made within the first week will make headlines for months. Just my prediction.
I know of 23 people just in my city that are planning on going to the nearest store to put down deposits and over 30 people at my company. Take this and apply all over the world..... The # of deposits made within the first week will make headlines for months. Just my prediction.
Same observation here. Model 3 is going to be bigger than most people imagine.
Just curious, can tax due from capital gains be counted for the 7500 credit?
If so, I may as well take some nice profits from the Model 3 release, to help buy the Model 3 while simultaneously getting a nice tax credit
Just curious, can tax due from capital gains be counted for the 7500 credit?
If so, I may as well take some nice profits from the Model 3 release, to help buy the Model 3 while simultaneously getting a nice tax credit
I'm not a tax expert, but any federal tax liability should be offset by the $7,500. I should have bought an EV in 2015!! Ouch!
There was another thread where someone pointed out that any penalty for early withdrawal cannot be offset by the EV credit. However, I would think that the actual capital gains tax can be. I think the capital gains tax is at most 20% so if you needed an additional $4,000 in tax liability you would need capital gains of at least $20,000. Plus, as previously mentioned, you would lose the early withdrawal penalty which would eat into your $7,500 savings. But I'm no tax accountant so you should seek the advice of one before going through with such a plan.
** Edit **
After googling IRA taxes I see that you incur regular income taxes when withdrawing funds from an IRA. So your tax rate would be your regular income tax rate in that year. The same premise is true as calculated above but the tax rate would be different. The early withdrawal penalty, if you are under age 59 1/2, would be 10% of what you cashed out. In my example that would be $2,000. If I'm right, it doesn't seem to make sense to do this. But if you are older than 59 1/2 it would make sense. You will eventually owe taxes on that portion of your IRA anyway so you might as well increase your tax liability in the year you can offset it with the EV credit. Plus you could reduce your auto loan by the amount of your IRA withdrawal.
Ugh, hopefully I didn't make things more confusing rather than clearing this up. :redface:
** Edit **
After googling IRA taxes I see that you incur regular income taxes when withdrawing funds from an IRA. So your tax rate would be your regular income tax rate in that year. The same premise is true as calculated above but the tax rate would be different. The early withdrawal penalty, if you are under age 59 1/2, would be 10% of what you cashed out. In my example that would be $2,000. If I'm right, it doesn't seem to make sense to do this. But if you are older than 59 1/2 it would make sense. You will eventually owe taxes on that portion of your IRA anyway so you might as well increase your tax liability in the year you can offset it with the EV credit. Plus you could reduce your auto loan by the amount of your IRA withdrawal.
Ugh, hopefully I didn't make things more confusing rather than clearing this up. :redface:
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Reeler
Decade of Pure EV Driving
Just lease the car and presumably Tesla will reduce the price equal to the credit they receive. Buy the car at the end of the lease.
Withdrawing IRA money does not affect the tax credit
That won't work - it's hard to ouitsmart the IRS. The IRA tax portion comes after the tax credit is applied. The 1040 is here: https://www.irs.gov/pub/irs-pdf/f1040.pdf and you can see that taxes due to IRA withdrawals are in the Other Tax section, which comes after the $7500 tax credit is applied on Line 54, which is where the Fed tax credit goes (see here: https://www.irs.gov/pub/irs-pdf/f8936.pdf).
That won't work - it's hard to ouitsmart the IRS
. The IRA tax portion comes after the tax credit is applied. The 1040 is here: https://www.irs.gov/pub/irs-pdf/f1040.pdf and you can see that taxes due to IRA withdrawals are in the Other Tax section, which comes after the $7500 tax credit is applied on Line 54, which is where the Fed tax credit goes (see here: https://www.irs.gov/pub/irs-pdf/f8936.pdf).
Not necessarily. Many lease companies artificially inflate the residual on EV's by 7500 to lower the amount financed. They take a hit when they sell the car, but it's offset by the credit. But if you try to buy at the end, you pay the inflated residual, not the fair market price. There was some discussion here about this a while ago, but I can't find it.
I wouldn't do this, unless you're retired.
So a person takes $20k out of your IRA, gets the $4000 they need to get the "full" EV credit, but then needs to pay state and federal taxes on the $20k, plus an early withdrawal pentalty, plus lose out on the time the money is not invested in the IRA, plus may be required to pay to buy and sell stocks in their IRA, etc.
It seems like too much paperwork/hassle to potentially save a little bit of money.
I agree, only do this if you're retired.
Reeler
Decade of Pure EV Driving
The LEAF and RAV4 weren't done that way. Just another reason for not leasing.
In any event, the 200K limit will be reached for Tesla before anyone is delivered their M3 in all likelihood so folks should just get used to it not being available. With the tardiness of Tesla on every other car, it is not worth fretting about.
Maybe that is why the Model 3 is going to have a base price $2500 less than the Chevy Bolt. From the sentiment on this forum, being $5K more expensive than a Bolt is a non-issue.
That won't work - it's hard to ouitsmart the IRS
Even better.
ProphetM
Member
You can convert money from your traditional IRA into a Roth IRA. This would not be penalized and I think it counts as normal income in the year that you do it. I don't know if there are limits on the amount that can be converted. I did $10,000 in 2014 and therefore owed more on my 2014 taxes.
ProphetM
Member
Hmm, I thought it was 7 years. Anyway, the goal is not to have the money available for pulling out; it's a way to make your tax burden higher, if you need to in order to utilize the full $7500 tax credit, without it really costing you anything. (and of course saving you money down the line.)
Five years from first putting money in, so start your accounts now and get those clocks ticking.
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