Tax Credit Clarification

[shrspeedblade]

If they deliver number 200k in the U.S. on December 31, 2017 at 11:59pm then we can gripe, until then it's meaningless.

 

[Garlan Garner]

If they deliver number 200k in the U.S. on December 31, 2017 at 11:59pm then we can gripe, until then it's meaningless.

I'm thinking that possibly 100,000 people probably don't need the credit. I know there is nothing most of the people in this forum can do about it, however maybe there are.

Let me put it this way. Nissan is certainly NOT what Tesla is in terms of the features and beauty of their LEAF, however I'm thinking that the majority of Nissan purchasers NEEDED the tax credit more than Bugatti's EV purchasers will or that Tesla purchasers have.

 

[shrspeedblade]

I'm thinking that possibly 100,000 people probably don't need the credit. I know there is nothing most of the people in this forum can do about it, however maybe there are.

Let me put it this way. Nissan is certainly NOT what Tesla is in terms of the features and beauty of their LEAF, however I'm thinking that the majority of Nissan purchasers NEEDED the tax credit more than Bugatti's EV purchasers will.

Have you considered that it's a reasonable assumption that those tax credits spurred some people to stretch for a Model S that otherwise would not have done so, as well as certainly nudging others to increase the options list thus providing Tesla with better profit margins? Remember, without the people who paid for the S&X we wouldn't be looking forward to the 3!

 

[Stolz25]

But isn't Elons car part of the 200,000 that is triggering the timer?

And maybe 100,000 similar customers that are triggering the timer?

I'm not sure why you are saying that it won't matter.

Half would matter, one won't. As I said, it's the remainder of the quarter when it is triggered, which means that unless it is the last car of the quarter, it wouldn't trigger the timer early.

 

[Garlan Garner]

Have you considered that it's a reasonable assumption that those tax credits spurred some people to stretch for a Model S that otherwise would not have done so, as well as certainly nudging others to increase the options list thus providing Tesla with better profit margins? Remember, without the people who paid for the S&X we wouldn't be looking forward to the 3!

Understood, however the tax credit is not a Tesla thing. There are "some" people who purchased a $70K car with the tax credit in mind. The Tax Credit is a federal thing, not a company thing.

The fact that people who purchased the Model S and X contributed to Tesla building the Model 3 is a Tesla thing. We need to keep these two things separate.

It's too easy to understand my point to be confused as to what I'm saying, however for those who will read this later.....

A person like ELON who gets billions of dollars in bonuses each year should not take up a slot in the counter of 200K that eliminates some Model 3 customers from participating. We all know that many model S and X owners are multi millionaires. For goodness sake Morgan Freeman has 10 of them. If he can afford them - great. However there should be some kind of voluntary "Don't count my car" exemption in the FEDERAL govt. Tax credit that would lend itself to more needy people participating in the tax credit.

 

[Garlan Garner]

Half would matter, one won't. As I said, it's the remainder of the quarter when it is triggered, which means that unless it is the last car of the quarter, it wouldn't trigger the timer early.

I agree. half would matter. That's my whole point as I'm making my statement. I'm using phrases like "Most model S and X owners and The majority of Model X and S owners" to signify that I believe its a large number of affluent owners....which is fantastic. Thank God for each of them, however, much less affluent Model 3 customers WILL get bumped out of the count by the tens of thousands of Model S owners who probably won't even take the credit.

 

[shrspeedblade]

Understood, however the tax credit is not a Tesla thing. There are "some" people who purchased a $70K car with the tax credit in mind. The Tax Credit is a federal thing, not a company thing.

The fact that people who purchased the Model S and X contributed to Tesla building the Model 3 is a Tesla thing. We need to keep these two things separate.

It's too easy to understand my point to be confused as to what I'm saying, however for those who will read this later.....

A person like ELON who gets billions of dollars in bonuses each year should not take up a slot in the counter of 200K that eliminates some Model 3 customers from participating. We all know that many model S and X owners are multi millionaires. For goodness sake Morgan Freeman has 10 of them. If he can afford them - great. However there should be some kind of voluntary "Don't count my car" exemption in the FEDERAL govt. Tax credit that would lend itself to more needy people participating in the tax credit.

I think we are generally in agreement, and I think what the state of California has done for the state benefit to be at least to some degree tied to income was a judicious move.

However, my perspective is the two things aren't quite as seperate. Even were I not getting the tax credit, and income-wise I am far more in a "Model 3 tax bracket" I would still consider myself to have benefitted indirectly as the earlier tax credits provided the opportunity for a car to be built down the road that I can afford: the Model 3.

Part of the issue here is when these credits and rebates were devised, nobody really envisioned a company like Tesla hitting the market so fast and so hard and instead of selling from the bottom up they've sold from the top down. Hopefully some of us plebes who got in line early will benefit from both the lower cost mass market car AND the tax credit!

 

[Garlan Garner]

I think we are generally in agreement, and I think what the state of California has done for the state benefit to be at least to some degree tied to income was a judicious move.

However, my perspective is the two things aren't quite as seperate. Even were I not getting the tax credit, and income-wise I am far more in a "Model 3 tax bracket" I would still consider myself to have benefitted indirectly as the earlier tax credits provided the opportunity for a car to be built down the road that I can afford: the Model 3.

Part of the issue here is when these credits and rebates were devised, nobody really envisioned a company like Tesla hitting the market so fast and so hard and instead of selling from the bottom up they've sold from the top down. Hopefully some of us plebes who got in line early will benefit from both the lower cost mass market car AND the tax credit!

I don't understand how I'm so unclear.

The majority of the people that purchased a Model S would have purchased it anyway because the Tax Benefit didn't exist when they made the purchase. The Model 3 was coming regardless of the tax credit. Elon made it clear what the Model 3 would be before there was a tax credit.

Why are people stating that the Tax credit was responsible for the Model 3? No it wasn't. We are talking about people buying 6 figure cars. If they wanted it they were going to buy it. The tax credit for most Model S buyers wasn't even 10 percent of the price of the car.

 

[dsvick]

The majority of the people that purchased a Model S would have purchased it anyway because the Tax Benefit didn't exist when they made the purchase. The Model 3 was coming regardless of the tax credit. Elon made it clear what the Model 3 would be before there was a tax credit.

Why are people stating that the Tax credit was responsible for the Model 3? No it wasn't. We are talking about people buying 6 figure cars. If they wanted it they were going to buy it. The tax credit for most Model S buyers wasn't even 10 percent of the price of the car.

I understand what your saying and agree it should have been based on "claimed credits" not just the number of cars sold. Because, you're right, not everyone would have claimed the credit, there are some people out there that would have said "I don't need it, I'll let someone else get it". However, I don't think it would be enough people to make that much of a difference in timing. People that got wealthy enough to not need the tax credit got there by being smart about their money and taking advantage where they could. Sure, there would be some selfless people out there, but not enough I don't think.

If you're looking to get it where it's needed most then it should have been based on income, but then lower income people would not qualify for the entire credit, so it would have to be changed to something else. For now, it is what they made it to be and we'll need to hope Tesla does what they can to maximize the number of people that get it.

 

[Garlan Garner]

I understand what your saying and agree it should have been based on "claimed credits" not just the number of cars sold. Because, you're right, not everyone would have claimed the credit, there are some people out there that would have said "I don't need it, I'll let someone else get it". However, I don't think it would be enough people to make that much of a difference in timing. People that got wealthy enough to not need the tax credit got there by being smart about their money and taking advantage where they could. Sure, there would be some selfless people out there, but not enough I don't think.

If you're looking to get it where it's needed most then it should have been based on income, but then lower income people would not qualify for the entire credit, so it would have to be changed to something else. For now, it is what they made it to be and we'll need to hope Tesla does what they can to maximize the number of people that get it.

Thanks. At least one person understood me.

 

[cpa]

Garlan,

Your cause is noble. And, if Congress had a third of a brain they would have pushed this credit with a phaseout much like so many other areas of the Code. So, once a person's AGI exceeded a certain amount, the credit gets phased down to zero. But having a cap at 200K vehicles sold would have reduced significantly the number of individuals who could claim the full credit as many taxpayers who purchased Teslas have rather large AGI. So, in hindsight a better solution might have been to lower the maximum credit from $7,500 to $5,000 with a phaseout (say starting at AGI > $250K - single; $400K MFJ) but increase the units available from 200,000 to 400,000. Alas, Congress had zero inkling in 2009 that Tesla would evolve as quickly and successfully as they did. I truly believe that Congress was focusing more on Prius and Leaf type vehicles and the taxpayers who would buy them.

Think about the morass that would develop if the credit were granted on a first-to-file-first-to-receive basis. A buyer of US car #190,000 in January 2018 and does not file until October 2019 (missing two K-1s from a fiduciary and partnership) could miss out on the credit while a buyer of car #275,000 ten months later files on February 10 because his return is consists solely of a W-2.

And, then what would happen if a person amends their return or is audited and the result of the amendment or examination reflects the addition or loss of the tax credit?

 

[Garlan Garner]

Garlan,

Your cause is noble. And, if Congress had a third of a brain they would have pushed this credit with a phaseout much like so many other areas of the Code. So, once a person's AGI exceeded a certain amount, the credit gets phased down to zero. But having a cap at 200K vehicles sold would have reduced significantly the number of individuals who could claim the full credit as many taxpayers who purchased Teslas have rather large AGI. So, in hindsight a better solution might have been to lower the maximum credit from $7,500 to $5,000 with a phaseout (say starting at AGI > $250K - single; $400K MFJ) but increase the units available from 200,000 to 400,000. Alas, Congress had zero inkling in 2009 that Tesla would evolve as quickly and successfully as they did. I truly believe that Congress was focusing more on Prius and Leaf type vehicles and the taxpayers who would buy them.

Think about the morass that would develop if the credit were granted on a first-to-file-first-to-receive basis. A buyer of US car #190,000 in January 2018 and does not file until October 2019 (missing two K-1s from a fiduciary and partnership) could miss out on the credit while a buyer of car #275,000 ten months later files on February 10 because his return is consists solely of a W-2.

And, then what would happen if a person amends their return or is audited and the result of the amendment or examination reflects the addition or loss of the tax credit?

Very well explained. I agree.

 

[wdolson]

I'm thinking that possibly 100,000 people probably don't need the credit. I know there is nothing most of the people in this forum can do about it, however maybe there are.

Let me put it this way. Nissan is certainly NOT what Tesla is in terms of the features and beauty of their LEAF, however I'm thinking that the majority of Nissan purchasers NEEDED the tax credit more than Bugatti's EV purchasers will or that Tesla purchasers have.

A lot of Model 3 buyers will not be able to use the full credit. My income level is more in line with the typical Model 3 than the typical Model S owner and I didn't use the full credit.

I suspect a lot of new Leaf owners either have a large income or aren't using the full credit. The tax incentive is really aimed at higher income people who have the extra income to buy what was a somewhat experimental technology when the legislation was drawn up.

It is intended to get wealthier people to be early adopters and help develop the new technology. From that perspective, it worked almost perfectly as designed (unusual for these kinds of incentive laws). Tesla is in the position its in right now: about to introduce the first mass produced, affordable pure EV, in large part because of the incentive and the people who bought the early cars.

 

[Garlan Garner]

A lot of Model 3 buyers will not be able to use the full credit. My income level is more in line with the typical Model 3 than the typical Model S owner and I didn't use the full credit.

I suspect a lot of new Leaf owners either have a large income or aren't using the full credit. The tax incentive is really aimed at higher income people who have the extra income to buy what was a somewhat experimental technology when the legislation was drawn up.

It is intended to get wealthier people to be early adopters and help develop the new technology. From that perspective, it worked almost perfectly as designed (unusual for these kinds of incentive laws). Tesla is in the position its in right now: about to introduce the first mass produced, affordable pure EV, in large part because of the incentive and the people who bought the early cars.

I disagree.

There is nothing to support the fact that its intended for wealthier people to be early adopters to do anything. Where in the world is the link for that quote?

I hate it when strong statements like that are thrown about as truth.

 

[gregincal]

I disagree.

There is nothing to support the fact that its intended for wealthier people to be early adopters to do anything. Where in the world is the link for that quote?

I hate it when strong statements like that are thrown about as truth.

I wouldn't say that there's nothing to support the theory. It's structured that only more affluent people can take full advantage of the credit. If they wanted to make EVs affordable for lower income people they would have made the credit refundable, so you would get it even if you didn't have a large tax liability. They also could easily have set an income limit, but they chose not to. You would have liked the law to have been written differently, but it wasn't.

 

[wdolson]

I disagree.

There is nothing to support the fact that its intended for wealthier people to be early adopters to do anything. Where in the world is the link for that quote?

I hate it when strong statements like that are thrown about as truth.

@gregincal summed up my thoughts on it. The median US household income is $51K and the average tax liability for those making $50K to $100K is $6251. Somewhere above 50% of American households pay less than $7500 a year.

 

[lupend88]

This may be a dumb question and I apologize in advance if it is, but I am single making $50k a year, do I have decent odds of getting the full tax credit (estimating my M3 will get here Q4 2017 or Q1 2018) or do I need to see my tax guy and have him adjust my withholdings?

 

[MP3Mike]

This may be a dumb question and I apologize in advance if it is, but I am single making $50k a year, do I have decent odds of getting the full tax credit (estimating my M3 will get here Q4 2017 or Q1 2018) or do I need to see my tax guy and have him adjust my withholdings?

You should talk to your tax guy, but your withholding amount makes no difference as to how much of a credit you get to utilize. It has to do with your total tax liability.

 

[lupend88]

You should talk to your tax guy, but your withholding amount makes no difference as to how much of a credit you get to utilize. It has to do with your total tax liability.

Thank you for the help, also nice to talk to a fellow Oregonian, did you line up at Washington Square for your car? Is my tax liability something I have control over?

 

[MP3Mike]

Thank you for the help, also nice to talk to a fellow Oregonian, did you line up at Washington Square for your car? Is my tax liability something I have control over?

Yes, I was in line at Washington Square...

You have control to increase your tax liability by doing a few things:

• Making more money.
• Converting Traditional IRA money to a Roth IRA
• Selling stock to have a realized/taxable gain.
• etc.