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Proposed Bill To Give Electric Vehicle Buyers $7,500 Credit Right When They Buy

Discussion in 'News' started by Tommy, Feb 8, 2011.

  1. Tommy

    Tommy Member

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  2. TEG

    TEG TMC Moderator

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    #2 TEG, Feb 8, 2011
    Last edited: Feb 8, 2011
  3. ChargeIt!

    ChargeIt! Member

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    Yes ... I think so. Possibly many LEAF reservationists with near-term deliveries will consider delaying delivery to get the rebate (rather than the credit). Same with Tesla Roadster owners-to-be ... just IMHO :wink: ( hate these emoticons! I mean ;-) )
     
  4. Tommy

    Tommy Member

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    The devil is in the details.

    As the law is written now, the $7,500 credit for a Tesla is a credit to offset your tax liability; those with less than a $7,500 tax liability would receive correspondingly less credit and indeed may wait to see how the new changes affect them.

    How Congress implements a $7,500 rebate at the point of sale WITHOUT getting Tesla (or other dealer) to verify your tax liability is one Houdini of a trick. My hope is that the credit becomes $7,500 regardless of tax liability. Now that would open up a lot more people to purchasing an EV.

    I understand the credit is also formulated on battery size, with $7,500 being the max which Tesla qualifies for.
     
  5. PopSmith

    PopSmith Saving for a Model 3

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    In my opinion, this idea is catering to the "I need it now" generation. To be totally honest I don't like the idea of giving the credit as a part of the purchase because it's worth much more as a tax credit, I believe most people just don't realize this.

    Example: For a single (not married) to pay $7,500 in taxes (in 2011) they'd need to earn $40,900; earning up to that amount means they'd pay no taxes as a result of the credit.

    http://www.moneychimp.com/features/tax_brackets.htm
     
  6. Tommy

    Tommy Member

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    I understand what your saying PopSmith, however EV's currently command a premium price and a lot of folks simply cannot afford to roll the higher price (the premium) into a loan or do not have the extra down payment to have affordable payments. GM, with the volt, is trying a 0% percent loan on the $7,500 until the purchaser gets their tax refund, however from the posts I've read on the GM-Volt site, not much success with that program.

    So, if the instant rebate at time of purchase gets more people behind the wheel of an EV is that a bad idea?
     
  7. TEG

    TEG TMC Moderator

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    I guess I fall into the "most people" category then. How is it worth much more as a tax credit? Isn't it the same $7500 back to you if you get it up front as apposed to getting it as a reduction in your tax liability when you file in the following year? I can see how it would be worth a bit more if they taxed the point-of-sale rebate/credit as income, but otherwise it seems like the same amount either way.

    What am I missing? Please elaborate.
     
  8. ckessel

    ckessel Active Member

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    Ditto. I'm baffled as well. How is a tax credit going to be worth more than what's effectively a $7500 instant rebate?
     
  9. Todd Burch

    Todd Burch Electron Pilot

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    I guess I'm in that boat too...I don't see the difference. I also wouldn't expect many folks with a $41k income to be buying $40K-80K cars. If anything, by getting an instant rebate I can invest that rebate and make interest or capital gains with it. I'm pretty sure the $7500 rebate would not be considered income and therefore would not be taxable...but I'm no CPA...
     
  10. PopSmith

    PopSmith Saving for a Model 3

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    OK, obviously I need to explain a bit futher. :redface:

    I understand that someone earning $41k/year probably isn't going to buy a Model S. I used that example because the $7,500 rebate would result in them paying zero income tax (due to it being a tax credit).

    As a better example let's say a couple, filing jointly, is paying taxes on $250,000 in 2011:

    ($17,000 minus 0) x 10% : $1700
    ($69,000 minus $17,000) x 15% : $7,800
    ($139,350 minus $69,000) x 25% : $17,587.50
    ($250,000 minus $139,350) x 28% : $30,982

    Total: $58069.50

    After the tax credit they pay $50,569.50. In order for this imaginary couple to pay that amount in taxes without a tax credit they would have to earn $223,215:

    ($17,000 minus 0) x 10% : $1700
    ($69,000 minus $17,000) x 15% : $7,800
    ($139,350 minus $69,000) x 25% : $17,587.50
    ($223,215 minus $139,350) x 28% : $23,482.20
    Total: $50569.70

    This means that a couple earning $250,000 is essentially getting $26,785 in income tax-free by using the $7,500 rebate, that's 357% more than the "face value" of the rebate.

    I hope that helps clarify my position a bit. :eek:
     
  11. ckessel

    ckessel Active Member

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    That doesn't work. The tax credit has no impact on your taxable income (unlike a deduction, though that'd be worse than credit). You're still paying state taxes, social security taxes, etc, on the original 250k income. Whether they pay 7500 less in taxes or take the cash immediate as a rebate, it's still $7500 regardless.
     
  12. bolosky

    bolosky Member

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    I wonder what the effect of changing the tax credit to an instant rebate will be on sales taxes. In the old system, if I paid $57,500 for my model S (and Washington didn't have a sales tax exemption for EVs), I'd pay $5750 in sales tax (the local rate's close enough to 10% that I'll pretend it is). After eventually getting the $7500, I'd pay a net of $55,750. If the rebate is applied before sales tax, then I'd pay $50,000 for the car after the rebate and then $5000 in sales tax for a net of $55,000 saving me (and costing Washington) $750.
     
  13. PopSmith

    PopSmith Saving for a Model 3

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    I see your point and understand that taxable income isn't increased by the credit as that wouldn't make much sense. The tax credit results in you paying $7,500 less in taxes and an instant rebate just gives you the $7,500 when you purchase the vehicle. Maybe it's six of one and a half-dozen of the other.

    My original point was something along the lines that someone (obviously) has to earn a great deal more than $7,500 to pay that amount in taxes, I just tried to explain it in a fancier fashion than was probably necessary.
     
  14. Todd Burch

    Todd Burch Electron Pilot

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    I'm still not tracking. That extra $26,785 of income, taxed at 28%, would incur an additional tax of...you guessed it...$7,500. So I still don't see the difference.
     
  15. qwk

    qwk Model S P2681

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    The instant rebate is better in the sense that the gov doesn't hold the money hostage for up to one year interest free.
     
  16. PopSmith

    PopSmith Saving for a Model 3

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    #16 PopSmith, Feb 9, 2011
    Last edited: Feb 9, 2011
    Maybe it's just an idea in my head that I can't see around. :redface:

    On the other hand, my point I was trying to make about the $26,785 is that while it incurs a tax of $7,500 you still have $19,285 left. However, I didn't think about this:

     
  17. vfx

    vfx Well-Known Member

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    I can't figure out why this is a debate.

    I'm a customer I buy a product and you give me a check now.

    Or

    I buy a product and you give me a check many months from now.

    People will 99 percent of the time ask for the money now. Often even if the later money comes with some sort of nominal bonus.
     
  18. shark2k

    shark2k Member

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    Exactly. VFX hit the nail on the head. I'm no tax person (IT person actually) but to me if you get the $7500 right away you could just as easily put that towards your taxes. And the other part about getting the actually money right away is that you can put it in the bank (haha yeah I know interest rates suck now) and earn interest on it until tax season. Of course the other option is they just take it off the price you pay and they get the money, really the same thing I think.

    -Shark2k
     
  19. Tommy

    Tommy Member

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    According to this CNN article, http://money.cnn.com/2011/02/04/autos/electric_car_rebate/ that is what the proposal is.

     
  20. Norbert

    Norbert TSLA will win

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    According to GM spokesman Greg Martin, GM will be "happy to sell them a Chevy Cruze". Must we conclude it is GM's secret plan to use the Volt to tease people into coming into the showroom, and then sell them something else?

    Seriously, this article seems to put a strange spin on the rebate. It "scares" dealers. Which world do they live in?
     

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