Tax credit 2023 [The tax credit discussion thread]

[zroger73]

According to the order tracking spreadsheet on this forum, several folks have ordered in Jan-Feb and already received their cars and that spreadsheet represents just a tiny fraction of all Tesla buyers. There are several thousand new Model Ys rolling out of Fremont and Austin every week there are going somewhere.

The full $7,500 tax credit still applies until the rules change. If you take delivery today and the rules change tomorrow, you still get the $7,500 credit.

 

[CarefulReader]

Saying "delayed again" isn't quite right. The IRS has to issue new regulations in order to replace the current rules. They have to define what is meant by ambiguous wording in the Inflation Reduction Act. Such things as what jurisdictions the IRA meant when it says "Free trade agreement." According to an IRS whitepaper, "The term 'free trade agreement' is not defined in the Inflation Reduction Act (or in any other statute)."

The whitepaper also says that, "Treasury and the IRS intend to issue proposed guidance on the critical mineral and battery component requirements in March 2023." In my (non-legal) opinion, until that guidance is issued, the comment period has elapsed, and formal rules are published, the current rules to obtain the tax credit remain unchanged. This may be one situation in which the government's slowness will be a benefit to Tesla customers with a car on order, but not yet delivered. I would be interested in a lawyer's opinion on this.

 

[CarefulReader]

I have a suspicion that the end of March won't be the end of the current rules for the full $7,500 tax credit as currently provided. The IRS has to issue new rules in order to replace the existing ones. Such regulations have to define what is meant by ambiguous wording in the Inflation Reduction Act. Such things as what jurisdictions the IRA meant when it says "Free trade agreement." According to an interesting IRS whitepaper, "The term 'free trade agreement' is not defined in the Inflation Reduction Act (or in any other statute)."

The whitepaper also says that, "Treasury and the IRS intend to issue proposed guidance [my emphasis] on the critical mineral and battery component requirements in March 2023." In my (non-legal) opinion, until that proposed guidance is issued, the comment period has elapsed, and formal rules are published, the current rules to obtain the tax credit remain unchanged. I would be interested in a lawyer's opinion on this.

This may be one situation in which the government's slowness will be a benefit to Tesla customers with a car on order, but not yet delivered.

 

[thefisch]

Call your local tesla location, talk to sales, and they can swap in your wife as primary. I am also just putting my wife solely on the title (sales can help with us) and filing separately.

Perhaps you won't owe more taxes when filing separately than we would. For me and my wife, we save thousands by filing jointly thanks to the more favorable tax brackets. Filing separate for us would cost us more than the credit. But this will vary for everyone. Naturally your wife has to have a high enough total tax on her own.

 

[justinpursuit]

I have a suspicion that the end of March won't be the end of the current rules for the full $7,500 tax credit as currently provided. The IRS has to issue new rules in order to replace the existing ones. Such regulations have to define what is meant by ambiguous wording in the Inflation Reduction Act. Such things as what jurisdictions the IRA meant when it says "Free trade agreement." According to an interesting IRS whitepaper, "The term 'free trade agreement' is not defined in the Inflation Reduction Act (or in any other statute)."

The whitepaper also says that, "Treasury and the IRS intend to issue proposed guidance [my emphasis] on the critical mineral and battery component requirements in March 2023." In my (non-legal) opinion, until that proposed guidance is issued, the comment period has elapsed, and formal rules are published, the current rules to obtain the tax credit remain unchanged. I would be interested in a lawyer's opinion on this.

This may be one situation in which the government's slowness will be a benefit to Tesla customers with a car on order, but not yet delivered.

I have seen several comments on this forum and on Twitter that imply that the current rules will remain in effect during the comment period following the issuance of proposed regulations. While that result is possible, it is not guaranteed, and that is not how it typically works.

When a notice of proposed rulemaking ("NPRM") is issued, taxpayers are generally allowed to rely on the proposed regulations immediately. Conversely, a taxpayer that does not follow the proposed regulations could generally be challenged under audit and would have little defense. This type of credit is easy for the IRS to enforce; if the IRS chose to deny credit claims for deliveries during the comment period, they could easily do so, even though the proposed regulations do not have the weight of law.

So while it is true that it will take 60+ days after the proposed regulations are issued for any final regulations to be issued, that does not mean a taxpayer can rely on the current guidance during the comment period, unless Treasury specifically provides that relief when they issue the NPRM. Hopefully they will do just that, but I would not bank on it. If the proposed regulations are unfavorable, it would still be possible for the final regulations to become more favorable based on comments received during the comment period. However, the only sure way to get the full credit is to take delivery before the proposed regulations are issued.

 

[idev2020]

If the NPRM from IRS is released, does it apply the day of the release, or the next day, or first working day after (if released on a Friday)?

I really hope they give some grace period, so the buyers can plan around it. Waiting for NPRM to be released by IRS, any day now, while Tesla delivery data keep bouncing around is frustrating.

 

[Mr.Stark]

For anyone who is still dealing with this issue, I picked up my M3 last week and my SA informed me that the "Tax credit eligibility form" would be generated soon by the documents team and will show up in the Documents section under your account. Here's what that form will look like

 

[justinpursuit]

If the NPRM from IRS is released, does it apply the day of the release, or the next day, or first working day after (if released on a Friday)?

I really hope they give some grace period, so the buyers can plan around it. Waiting for NPRM to be released by IRS, any day now, while Tesla delivery data keep bouncing around is frustrating.

The IRS clarified this and said it would be the next day. So if you take delivery on the day new guidance is released you can rely on current guidance.

From FS-2022-42, December 2022
"Beginning January 1, 2023, eligible vehicles may qualify for a tax credit of up to $7,500. Until the day after the Treasury Department and the IRS issue proposed guidance on the critical mineral and battery component requirements of the new clean vehicle credit under § 30D, the credit is calculated as a $2,500 base amount plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000 beyond the base amount. In general, the minimum credit amount will be $3,751 ($2,500 + 3 * $417), representing the credit amount for a vehicle with the minimum of 7 kilowatt hours of battery capacity. Once the Treasury Department and the IRS issue the proposed critical mineral and battery component guidance later in 2023, additional requirements will change the amount of the credit (that is, an eligible vehicle may qualify for more or less credit than before). The credit amount will depend on the vehicle meeting the critical minerals requirement ($3,750) and/or the battery components requirement ($3,750). A vehicle meeting neither requirement will not receive a credit, a vehicle meeting only one requirement may be eligible for a $3,750 credit, and a vehicle meeting both requirements may be eligible for the full $7,500 credit. The Treasury Department and the IRS anticipate issuing the proposed guidance in March."

 

[Ray_R]

The magic person on the other end of the Tesla text number confirmed any documents we need for the tax credit will eventually show up in the documents section of our Tesla account. Same place as the motor vehicle purchase agreement, proof of insurance, order agreement, etc.
No timetable for it though. No EDD.

 

[Ray_R]

The magic person on the other end of the Tesla text number confirmed any documents we need for the tax credit will eventually show up in the documents section of our Tesla account. Same place as the motor vehicle purchase agreement, proof of insurance, order agreement, etc.
No timetable for it though. No EDD.

 

[HitchHiker71]

The IRS clarified this and said it would be the next day. So if you take delivery on the day new guidance is released you can rely on current guidance.

From FS-2022-42, December 2022
"Beginning January 1, 2023, eligible vehicles may qualify for a tax credit of up to $7,500. Until the day after the Treasury Department and the IRS issue proposed guidance on the critical mineral and battery component requirements of the new clean vehicle credit under § 30D, the credit is calculated as a $2,500 base amount plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000 beyond the base amount. In general, the minimum credit amount will be $3,751 ($2,500 + 3 * $417), representing the credit amount for a vehicle with the minimum of 7 kilowatt hours of battery capacity. Once the Treasury Department and the IRS issue the proposed critical mineral and battery component guidance later in 2023, additional requirements will change the amount of the credit (that is, an eligible vehicle may qualify for more or less credit than before). The credit amount will depend on the vehicle meeting the critical minerals requirement ($3,750) and/or the battery components requirement ($3,750). A vehicle meeting neither requirement will not receive a credit, a vehicle meeting only one requirement may be eligible for a $3,750 credit, and a vehicle meeting both requirements may be eligible for the full $7,500 credit. The Treasury Department and the IRS anticipate issuing the proposed guidance in March."

So if I'm reading this right - even if I take delivery of our MY before 3/31 - if the IRS introduces regs before that date - we may still lose out on the full $7500 tax credit? Our ETA is 3/24-3/31 so this makes me a bit nervous.

 

[zroger73]

Just as the IRS states, the full $7,500 will remain effective until the day after guidance is issued. They "anticipate"/"intend" to issue this guidance "in March". It's now the 16th of March and the guidance has not yet been issued, but it could be anywhere from today to the 31st...or it might not happen in March at all. If guidance is issued today, the credit may remain at $7,500 (unlikely) or drop to $3,750 or $0 (likely) tomorrow. If the guidance isn't issued until, say, some random date like July 5th, then the $7,500 credit will remain until July 6th at which point it will likely drop to $3,750 or $0.

 

[HitchHiker71]

Just as the IRS states, the full $7,500 will remain effective until the day after guidance is issued. They "anticipate"/"intend" to issue this guidance "in March". It's now the 16th of March and the guidance has not yet been issued, but it could be anywhere from today to the 31st...or it might not happen in March at all. If guidance is issued today, the credit may remain at $7,500 (unlikely) or drop to $3,750 or $0 (likely) tomorrow. If the guidance isn't issued until, say, some random date like July 5th, then the $7,500 credit will remain until July 6th at which point it will likely drop to $3,750 or $0.

Well, then let's hope that the IRS is just as behind schedule on this work as they are on processing tax returns!

 

[Spinkick]

So, is there any way I can take advantage if my company leased the car? Its in my name etc, the company reimburses me.

 

[J-a-x]

I bought my Model Y in Jan 2023 and I assumed I could claim the tax credit when I filed my tax return. I'm working on my tax return for 2022 now and it says in order to claim a tax credit on a car on my 2022 tax return it needs to have been purchased in 2022.

Does this mean I can't collect on my model-Y tax credit until I file my 2023 tax return in 2024? Basically I won't see the benefit for another full year?

 

[Spinkick]

I bought my Model Y in Jan 2023 and I assumed I could claim the tax credit when I filed my tax return. I'm working on my tax return for 2022 now and it says in order to claim a tax credit on a car on my 2022 tax return it needs to have been purchased in 2022.

Does this mean I can't collect on my model-Y tax credit until I file my 2023 tax return in 2024? Basically I won't see the benefit for another full year?

Yes, because you bought it during this tax year, 2023, which you do not file taxes on until the beginning of 2024. Dont forget also that if you install a charger, you may also claim that on your federal return.

 

[J-a-x]

Yes, because you bought it during this tax year, 2023, which you do not file taxes on until the beginning of 2024. Dont forget also that if you install a charger, you may also claim that on your federal return.

Thanks!

Why were people so anxious about getting their cars delivered before March in that case? I remember hearing a lot of people worrying that their car will get delivered late and they wouldn’t be able to apply the full credit. Seems like if you can’t apply for the credit until next year anyway it shouldn’t really matter.

 

[Kgrae]

Thanks!

Why were people so anxious about getting their cars delivered before March in that case? I remember hearing a lot of people worrying that their car will get delivered late and they wouldn’t be able to apply the full credit. Seems like if you can’t apply for the credit until next year anyway it shouldn’t really matter.

Because if the credit goes away you don't get that money potentially on your return next year. It's still $7,500, you're just not getting it till February/March of next year.

 

[J-a-x]

Interesting. I always assumed that the law/guidance on the date you file your taxes is all that would matter, not the law/guidance when you purchase your car.

For example if I buy my car in 1/2023 but the law gets vetoed before I file my 2023 taxes (which happens in 2024) then I get nothing. Maybe that's not how it works.

Anyway I guess I don't need to think about it again for another year!

 

[idev2020]

You can't "veto" a law. In this case, even if a new law is passed or older law overridden, it cannot be retroactive without exceptions when it causes undue harm/hardship for legally abiding citizen.