Model 3 Unveiling - March 31st!

[flankspeed8]

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.

This is a good strategy to recharacterize a Traditional IRA into a Roth. Yes, the amount of the conversion would be taxed at your marginal rate, thus it would inflate your tax for that year to help you qualify for the full deduction.

 

[smartypnz]

Will GM have the advantage of the Tax Credit being available? How many EV's has GM built at this point? (not saying this would be a deciding purchasing factor as the Model 3 will most likely be superior in so many ways - I am just curious how the marketing pitch will pan out)

 

[dgpcolorado]

This is a good strategy to recharacterize a Traditional IRA into a Roth. Yes, the amount of the conversion would be taxed at your marginal rate, thus it would inflate your tax for that year to help you qualify for the full deduction.

Just to be clear with the terminology: You can "convert" some or all of a taxable IRA to a Roth IRA by the end of the tax year. If you decide that you want reverse it you can "recharacterize" some or all of the conversion (reversing the conversion) by taking the money from the Roth IRA and putting it back in the taxable IRA by April 15 of the following year.

The amount of money that you convert from a taxable IRA to a Roth IRA becomes taxable income in the year of the conversion. Roth IRAs are not taxable at all and can be passed on to heirs [meaning that, unlike a taxable IRA, they are not subject to "required minimum distributions" (RMD) beginning at age 70½]. One can withdraw money from a Roth IRA beginning five years after it is established. [There are other rules wrt age and whether or not one withdraws contributions or earnings that I won't try to explain.]

As I found out when I did it in 2011 to qualify for the federal tax credit, a downside of conversion is that you might end up raising your tax bracket, which lowers the effective value of the credit you receive. If you only need a little boost to your income and you stay in the same tax bracket, this concern isn't an issue.

For the model 3, I think I would just wait until the tax credit drops to 50% or 25% since it isn't tax efficient (for me) to do another IRA to Roth conversion large enough to qualify for the full credit. I would also qualify for the substantial $6000 Colorado state tax credit, which is "refundable", unlike the federal tax credit.

For someone who wants to eventually buy the car, it appears that leasing to get the tax credit won't work. Tesla appears to add the tax credit to the residual value of the car, thus greatly lowering lease payments, but they tell me that the buyout price would still be the residual plus the tax credit amount, which is unfair (the leasing company keeps the credit). If this is true (I'd have to see wording from an actual lease to know) and they don't change it, leasing to buy is not a good strategy. (It also may not work well for Coloradans because leasing appears to greatly reduce the state tax credit.)

FWIW. All this IRA stuff is subject to income limits (but high income people aren't the ones concerned about having taxes high enough to qualify for the tax credit), so YMMV. Talk to a tax adviser or read https://www.irs.gov/pub/irs-pdf/p590a.pdf

 

[xhawk101]

Keep in mind after the 200,000 us sales expiration the discount is phased out it doesn't go away immediately

 

[Reeler]

Will GM have the advantage of the Tax Credit being available? How many EV's has GM built at this point? (not saying this would be a deciding purchasing factor as the Model 3 will most likely be superior in so many ways - I am just curious how the marketing pitch will pan out)

GM has sold the Spark under the program. Very low sales.

 

[dgpcolorado]

GM has sold the Spark under the program. Very low sales.

I believe that Volt sales also qualify and add to GM's total sales for the tax credit.

 

[ZAKEEUS]

Yes, Volt sales also qualify. They have sold just over 80k in the US

 

[EVNow]

If the 200k cap stays - I expect it to be increased or in someway modified - then GM, Tesla & Nissan will not get to 200k until after 2017/18 or so.

So far (roughly)
Nissan : 90k
GM : 90k
Tesla : 60k

There have been a number of optimistic projections that show tax credit evaporating in 2017/18 for all three. I'm more skeptical. I think it is quite likely that all three will not reach 200k until a year or two into their next gen EV sales. Even then, some kind of change in federal tax is likely that will extend the tax credits (may be to 1M for all OEMS together or some such level playing field for all OEMs).

 

[dhanson865]

If the 200k cap stays - I expect it to be increased or in someway modified - then GM, Tesla & Nissan will not get to 200k until after 2017/18 or so.

So far (roughly)
Nissan : 90k
GM : 90k
Tesla : 60k

There have been a number of optimistic projections that show tax credit evaporating in 2017/18 for all three. I'm more skeptical. I think it is quite likely that all three will not reach 200k until a year or two into their next gen EV sales. Even then, some kind of change in federal tax is likely that will extend the tax credits (may be to 1M for all OEMS together or some such level playing field for all OEMs).

Tesla is likely going to be closer to 70,000 in a couple of days.

66,634 was the Jan number

Model 3 pre order and tax credit ? has the math. I'll update it again when the scorecard gets updated.

 

[dgpcolorado]

...Even then, some kind of change in federal tax is likely that will extend the tax credits (may be to 1M for all OEMS together or some such level playing field for all OEMs).

I can't see that happening. I would guess that both this Congress and the next one would be quite hostile to any such changes, save for eliminating the tax credit entirely.

 

[Model 3]

(unless it's simultaneous launch parties at each store with reservations afterwards).

This is what I'm hoping for, but just not really believe.... :tongue:

Looks like Tesla Norway - in cooperation with Tesla Owners Club Norway - have plans on arranging such an event with online streaming from the unveiling. At least they are checking if it is any interests.
http://www.tocn.no/2016/02/tocn-live-model-3-launch-event-i-samarbeid-med-tesla-norge/ (Link in Norwegian).

Details like where or when is not determined yet. Does not looks like we here will be able to reserve the car in the shops March 31st. But maybe will may reserve on the event? This will probably be by night time - already on the April 1st? - here in this time zone.

 

[dhanson865]

Tesla is likely going to be closer to 70,000 in a couple of days.

66,634 was the Jan number

Model 3 pre order and tax credit ? has the math. I'll update it again when the scorecard gets updated.

I've cleaned up the post and updated for the Feb numbers. It appears I had one too many quarters of credits in my math.

The current totals at end of 2015 + partial 2016 would be

US running total Tesla Sales vs 200,000 for federal credit phase out trigger
2011 end 1,900
2012 end 4,550 (2,650 for 2012 + prior year)
2013 end 22,200 (14,650 for 2013 + prior years)
2014 end 39,500 (17,300 for 2014 + prior years)
2015 end 65,414 (25,914 for 2015 + prior years, Model S and Model X)
2016 Feb 68,584 (3,170 for Jan/Feb 2016 + prior years)

Do the math if Tesla is doing less than 26,000 a year US in 2015 how many years will it take to hit 200,000 US sales? They'll ramp up S and X production but there will still be plenty of discounts on Model 3.

Lets say 50,000 US for 2016 and 75,000 US for 2017, 25,000 in the first quarter of 2018 finally triggering the phaseout.

Tax Credit Phase-Out Schedule Quarter Credit

Q4 2017 possible deferred shipping to EU/ROW to avoid crossing 200,000 in US
Q1 2018 (200,000 mark crossed, some trickling of Model 3 in this quarter, maybe 500 a week for 7,500 with full credit?)
Q2 2018 Model 3 with Full credit (no signature series per Elon, maybe 1,000 to 2,000 a week for 25,000 with full credit?)
Q3 2018 50% of full amount (will they be making 3,000+ a week by then? Maybe 12 weeks worth is 40,000 Model 3s with half credit?
Q4 2018 50% of full amount (maybe 60,000 model 3s with half credit in this quarter?)
Q1 2019 25% of full amount (maybe 75,000 Model 3s with quarter credit)
Q2 2019 25% of full amount (maybe 100,000 Model 3s with quarter credit, with extra production going outside the US)
Q3 2019 no credit


all in all they might get out 35,000 with full credit, 100,000 with half credit, and another 175,000 with quarter credit?

Shift the trigger earlier by one quarter and 25,000 less cars get a full credit, shift that trigger later by one quarter and 40,000 more get a full credit. Just depends when they can start cranking out Model 3 en masse and when the trigger is.

So unless my trigger to expiration math was right before my old post was off by quite a few cars on the credits. The new numbers have a lot less credit flowing around for Model 3.