Tax Credit Clarification

[ccutrer]

Yes - my specific question: Using the Lease, the $7,500 tax benefit gets lost. The Tesla Design "loan" page suggests that the $7500 is applied as a credit upon financing. If I understand the difference - I don't get the $7,500 on my taxes, but get it as a rebate-just like the lease. This seems like a kink - do I loose the 7500 on a loan like I do on a lease? Should I finance elsewhere such that the $7500 in tax credit is a clean IRS issue instead of a loan issue?

So, perhaps "ccutrer" above nailed it. But the clause "offset by $7500 incentives" made me pause and think of the lease and loan had the same flaw/kink.

Tesla will also happily include "fuel savings" in their calculators. An even more nebulous number, that definitely does not lower the price of the car or loan payments directly. So yes, the $7500 tax credit does not act as a rebate on the purchase - you get it back the following year when you file taxes.

 

[wdolson]

And not everyone qualifies for the tax credit. If you owe less than $7500 in taxes, it will wipe out your federal income tax for that year, but you will lose the remaining balance of the credit. I know at least one person on the forum said their tax advisor told them their type of income didn't qualify for the credit, though I think it was some form of trust where most of their income came from. I don't recall the details.

 

[EaglesPDX]

Good info. That means I'll have to take delivery in 2018 tax year as I have $12,000 in solar tax credits to use up in 2016 and 2017 though I might be OK in 2017.

 

[AZ Desert Driver]

Thanks guys...Had this Forum NOT drilled into the lease/7500 details, I would have missed it. I understand how loans work, an how my taxes work, but failed to grasp the lease first time through. Clarifying that the Tesla Loan that "cutter" alerted on is a straight forward loan and free of kinks is comforting. BTW - they have a 72 mo at 1.49% and a 78 mo at 1.74% - not even USAA can touch those terms.

 

[SageBrush]

Yes - my specific question: Using the Lease, the $7,500 tax benefit gets lost.

I don't think this is correct unless you decide to buy your vehicle at the end of the lease

 

[AZ Desert Driver]

I don't think this is correct unless you decide to buy your vehicle at the end of the lease

Sagebrush - you seem to be a solid resource on tax questions. My wife just asked to see "the form" to apply for the $7500 credit. I thought is was buried in the previous 13 pages, but could not find it. If it is not to much to ask - can you lead me into those forms? I want to print the and say "see honey, just put it on line 63" - but I think there must be some attachment form too.
BTW - Thanks for your numerous, erudite contributions. Its been a pleasure to learn from you.

 

[melindav]

Sagebrush - you seem to be a solid resource on tax questions. My wife just asked to see "the form" to apply for the $7500 credit. I thought is was buried in the previous 13 pages, but could not find it. If it is not to much to ask - can you lead me into those forms? I want to print the and say "see honey, just put it on line 63" - but I think there must be some attachment form too.
BTW - Thanks for your numerous, erudite contributions. Its been a pleasure to learn from you.

Obviously for last year, but here it is
https://www.irs.gov/pub/irs-pdf/f8936.pdf

 

[AZ Desert Driver]

Obviously for last year, but here it is
https://www.irs.gov/pub/irs-pdf/f8936.pdf

Wow - that took a whole 9 min from ask-to-answer. I spent much more than that re-reading 13 pages. Thanks - this is exactly what I was looking for,

 

[melindav]

Google is much quicker

 

[melindav]

And the explaination on the credit and how it's calculated here
Internal Revenue Bulletin - December 27, 2012 - Notice 2012-54

 

[SageBrush]

Sorry DD, I've been away a few days. Glad you got your answer answered.
By the way, Colorado has new rules coming up.

Thanks for the compliment but I just have too much time on my hands that I sometimes waste by reading the government publications. Yech
DGPcolorado is often my go to resource

 

[AZ Desert Driver]

Sorry DD, I've been away a few days. Glad you got your answer answered.
By the way, Colorado has new rules coming up.

between you and melindav - nothing but good advice.
As I am in Arizona, and won't be pushing the envelope into Colorado - what about new Colo rules do I need to know?

 

[dgpcolorado]

between you and melindav - nothing but good advice.
As I am in Arizona, and won't be pushing the envelope into Colorado - what about new Colo rules do I need to know?

Until recently Colorado had a $6000 refundable tax credit for the purchase of an EV with a reasonable battery size (including used EVs that haven't been registered in Colorado). Thanks to a new law, HOUSE BILL 16-1332 signed by the Governor on June 6, that will change to a $5000 point of sale rebate for new EVs (used cars no longer qualify). This should make it easier for buyers of EVs to get the money upfront during the purchase process. The new program starts on January 1st 2017. I haven't actually read the bill since my purchase was under the old rules. So I don't know how they will restrict it to Coloradans but I presume that the car will need to be registered in Colorado as part of the purchase process to qualify. Just guessing.

Alternative Fuel Motor Vehicle Income Tax Credits - HB 16-1332

 

[EV4Life]

Will I be able to get another $7500 federal tax credit if I buy another Tesla. I already received the whole amount in 2014.

 

[SageBrush]

Will I be able to get another $7500 federal tax credit if I buy another Tesla. I already received the whole amount in 2014.

yes

 

[rfanatical]

Hi Tesla owners: Hoping to get a bit of advice from you since you've all gone through the process of getting the federal tax credit. I'm about to pull the trigger to buy the 60D. One of the owner advisors at the Dublin Tesla Store tells me that in order to receive the $7500 tax credit, you must owe IRS when filing. I tried to clarify what he meant by "owe", differentiating between total yearly tax liability and payment/refund calculated on the tax return. He was quite adamant that if I don't "owe", i.e. need to write IRS a check for more than $7500 at the end of the year, I wouldn't get the full credit. This does not make sense to me.
My total federal taxability is much more than $7500 and I withhold a bit more each month so that I get a net refund at the end of the year. By his proclamation, I wouldn't get any of the tax credit.
Can you guys help me clarify? I hope he's wrong.

 

[SageBrush]

Hi Tesla owners: Hoping to get a bit of advice from you since you've all gone through the process of getting the federal tax credit. I'm about to pull the trigger to buy the 60D. One of the owner advisors at the Dublin Tesla Store tells me that in order to receive the $7500 tax credit, you must owe IRS when filing. I tried to clarify what he meant by "owe", differentiating between total yearly tax liability and payment/refund calculated on the tax return. He was quite adamant that if I don't "owe", i.e. need to write IRS a check for more than $7500 at the end of the year, I wouldn't get the full credit. This does not make sense to me.
My total federal taxability is much more than $7500 and I withhold a bit more each month so that I get a net refund at the end of the year. By his proclamation, I wouldn't get any of the tax credit.
Can you guys help me clarify? I hope he's wrong.

You are right -- liability, not refund/payment

 

[EaglesPDX]

He was quite adamant that if I don't "owe", i.e. need to write IRS a check for more than $7500 at the end of the year, I wouldn't get the full credit. .

If, after your normal refund, you have paid the IRS $7,500. You will be get this back by applying for the credit.

It has to do with how much you paid IRS in 2016.

How much will you have paid IRS in 2016 after you get your normal refund?

You will get $7,500 of that back. If it's $0. You will get $0 back. If it's $2,500, you will get $2,500 back.

 

[MP3Mike]

My total federal taxability is much more than $7500 and I withhold a bit more each month so that I get a net refund at the end of the year. By his proclamation, I wouldn't get any of the tax credit.
Can you guys help me clarify? I hope he's wrong.

He is wrong, but even if he wasn't you could just start having less withheld so that you did owe the IRS at the end of the year. (In fact you could do that anyhow so you aren't giving them as much of a free loan.)

 

[melindav]

@rfanatical - a week or so ago I outlined a simple example of the tax credit:

It's your tax liability, not what you owe, so withholdings don't matter. There are tons of other threads outlining it, but for simplicity sake here's an example:
Assume you are single and have a gross income of 50,000. You automatically get the standard single deduction of $6,300 bringing the income to 43,700. Worse case you have zero other deductions your tax liability is calculated from this at $6,725.
But if you have a kid, a house, medical expenses or any other deductions, your taxable income would be reduced before the tax liability is calculated.

I'm surprised Tesla doesn't have a policy for staff to not advise on the credit but suggest people check with a tax consultant if they are unsure.