Tax credit 2023 [The tax credit discussion thread]

[Mr_Joe]

Treasury guidance on electric vehicle tax credit due next week

Domestic content measures were critical to winning the support of Joe Manchin, who made it a priority for the law to develop a U.S. EV supply chain and end the industry's dependence on Chinese suppliers.

www.politico.com

 

[GreenHokie]

Treasury guidance on electric vehicle tax credit due next week

Domestic content measures were critical to winning the support of Joe Manchin, who made it a priority for the law to develop a U.S. EV supply chain and end the industry's dependence on Chinese suppliers.

www.politico.com

For me, the most important quote from that article is what was said by the US Treasury,

Treasury Assistant Secretary for Tax Policy Lily Batchelder said the department will work with the private sector to ensure a “smooth transition” on which vehicles qualify for the incentives and for what amount.

To me, this statement supports the belief that there will be some type of short grace period given after the official guidelines are released. So, hopefully, that means anyone who has already ordered an EV (which currently qualifies for the full $7500 tax credit), will be given some time to take delivery so their purchase remains qualified for the full tax credit. We shall see…. I’m scheduled to take delivery (red MYP) on March 30 or 31.

 

[Mr_Joe]

For me, the most important quote from that article is what was said by the US Treasury,

Treasury Assistant Secretary for Tax Policy Lily Batchelder said the department will work with the private sector to ensure a “smooth transition” on which vehicles qualify for the incentives and for what amount.

To me, this statement supports the belief that there will be some type of short grace period given after the official guidelines are released. So, hopefully, that means anyone who has already ordered an EV (which currently qualifies for the full $7500 tax credit), will be given some time to take delivery so their purchase remains qualified for the full tax credit. We shall see…. I’m scheduled to take delivery (red MYP) on March 30 or 31.

Tesla has told its employees the model 3 will not qualify for the $7,500 credit effective April 1. I hope you're right....

 

[trm2]

First and foremost 7500 is tax credit.
Which means your tax liability must be >7500 to claim full credit.
If your tax liability is, say, only 5000....your benefit is 5000.

My calculations says to have 7500 tax liability the income must be >68000 to get full benefit. For incomes less than 68k you liability is whatever you paid. There is an upper income limit as well.

401k contribution not included in 68k

Unless it is a Roth 401k Contribution, which is a good way to increase your tax liability if needed.

 

[Amolpurav]

Article from Electrek.co:

Tesla expects to lose full $7,500 tax credit on its cheapest electric car

"The Model 3 Standard Range is built in Fremont, California, in the US, but its battery pack is using LFP battery cells built in China.

The communication to employees appears to have been done to prepare buyers of those vehicles, as the access to the full credit could change if delivery is done on April 1 rather than March 31 – pending official guidance.

As for Tesla’s other Model Y and Model 3 vehicles in the US, they are expected to retain access to the full tax credit as they are using battery cells built by Tesla or Panasonic in Nevada, California, or Texas.

The battery material sourcing might be more of an issue, but Tesla appears confident that it won’t be the case as a large percentage of its battery materials are sourced from countries with free trade agreements like Australia and Canada."

This article states that the MY and M3 (other than standard range) can retain full credit.

 

[Jimboy435]

U.S. Treasury to release EV battery sourcing rules next week

The U.S. Treasury Department on Wednesday said it will release guidance next week on sourcing requirements for electric vehicle battery tax subsidies under President Joe Biden's climate change law, the first in a string of highly anticipated rules to determine how broadly the credits can be...

finance.yahoo.com

 

[zroger73]

Article from Electrek.co:

As for Tesla’s other Model Y and Model 3 vehicles in the US, they are expected to retain access to the full tax credit as they are using battery cells built by Tesla or Panasonic in Nevada, California, or Texas.

The battery material sourcing might be more of an issue, but Tesla appears confident that it won’t be the case as a large percentage of its battery materials are sourced from countries with free trade agreements like Australia and Canada."

This article states that the MY and M3 (other than standard range) can retain full credit.

While that is encouraging, I must take those statements as the author's opinions until I see confirmation in writing on a government website.

 

[thefisch]

While that is encouraging, I must take those statements as the author's opinions until I see confirmation in writing on a government website.

Agreed, but I've wondered if the government will actually do any verification as the manufacturers will probably be certifying whether their vehicles meet the standard and submit documents.

 

[jokoy54]

Finally after a couple of months waiting game i can finally touch/drive my MYLR on march 31st. But after reading an article about model 3 will loose its tax credit i’m now worried if MYLR will also loose it. Thank you!

 

[E90alex]

No one knows for sure until the IRS issues updated rules and manufacturers detail where minerals are sourced form.

The Model Y should qualify for at least $3750 since the battery is assembled in North America, but the jury is out on where Tesla sources the minerals to qualify for the other $3750.

 

[jokoy54]

Finally after a couple of months waiting game i can finally touch/drive my MYLR on march 31st. But after reading an article about model 3 will loose its tax credit i’m now worried if MYLR will also loose it. Thank you!

 

[jokoy54]

I searching all over the internet but not getting the answer for my question.

The question is, If my tax liability is $10,000 (line 22 on W2) for the year and I have paid it in full or little excess in my monthly pay check tax deductions, say in this case I have paid $10,500 by end of December, so I will get a refund of $500. So with the $7500 tax credit will I get $8000 back in this case ( $500 + $7500) ?

No, only $500 refund

 

[Occhis]

No, only $500 refund

This is NOT correct. If his tax liability is 7500 or more he will get the full 7500. Has nothing to do with how much he may or may not owe when he files his taxes.
In his example, he would indeed get 8000 back.

 

[Jerryr]

This is NOT correct. If his tax liability is 7500 or more he will get the full 7500. Has nothing to do with how much he may or may not owe when he files his taxes.
In his example, he would indeed get 8000 back.

YOU ARE CORRECT! For example, My tax liability exceeded $7,500 last year (2022). I had not had enough deducted from my pay and was expected to own an additional $861. BUT I purchased a Nissan Leaf in November 2022 which qualified for the tax credit last year. Instead of having to pay $861 the IRS sent me a refund of $6,639.

Earlier this month I purchased a 2023 Tesla MYLR. I just reduced my withholding by $750 starting next month so I won't be getting a huge refund next year when I file my Federal return. So for 9 remaining months will take home an additional $750 each month and the refund next year will be smaller.

 

[Occhis]

Thank you for posting a real-life example of how the credits work. It’s incredible how little some people know about filing taxes.

 

[Jerryr]

PROOF!

Here is the bank deposit for my refund. Instead of owing at the end of the year they refunded me the difference after applying the $7,500 tax credit.

Mar 8, 2023

IRS TREAS 310 TAX REF PPD

ACH credit

$6,639.00

 

[HitchHiker71]

No one knows for sure until the IRS issues updated rules and manufacturers detail where minerals are sourced form.

The Model Y should qualify for at least $3750 since the battery is assembled in North America, but the jury is out on where Tesla sources the minerals to qualify for the other $3750.

To be specific - IIRC the 2170 packs used in US built MYs and M3s are sourced, built and assembled by Panasonic in Panasonic US-based plants. Those packs are then shipped to Tesla plants for installation into Tesla M3/MY LR and P models. The only batteries that Tesla actually sources and assembles itself today are the 4680 packs that are currently only being installed in Austin built MY AWD models at this time. Since Panasonic sources a good amount of the battery materials from US trade-friendly nations - like Australia for example - the rumor is that both the MY LR and the M3 LR will still qualify for the full $7500 tax credit after the updated rules are published - but again as everyone has said - until the rules are actually published - no one knows for sure. The only thing we do know is that the M3 SR isn't going to qualify for the full tax credit amount - because it uses LFP battery packs that are sourced and built in China (from CATL IIRC) right now - so it will only likely qualify for $3750 once the new rules are in force.

 

[GSP]

Just to clarify, Panasonic makes the 2170 cells at Giga 1, but Tesla builds the modules and packs there. Not important to the $7500 consumer tax credit who builds what, but Tesla will receive $10/kWh tax credit for building the modules, and Panasonic will receive $35/kWh tax credit for building the cells. Panasonic may pass some of the $35 on to Tesla with lower pricing, depending on private negotiations with Tesla’s Purchasing Department.

GSP

 

[patmurphey]

To be clear, Giga Nevada is jointly owned by Panasonic and Tesla. In fact, there is an agreement that Tesla owns rights to any State and Federal tax credits, but that appears to be a subject of negotiation in light of the IRA battery manufacturing credits.

Edit: Maybe clarified by above post.

 

[vinny84]

Looks like IRS updated their webpage and Model 3 and Y are still on the list of eligible vehicles.

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov