Tax Credit Clarification

[desimom99]

Thanks for your responses. Went ahead and put $1000. We will see. I am kicking myself for taking this long to decide on this !

 

[dragonxt]

$3750 still isn't bad. Maybe a Tesla Owner friend can buy one for you?

 

[SageBrush]

Thanks for your responses. Went ahead and put $1000. We will see. I am kicking myself for taking this long to decide on this !

EV tech advances so quickly that a good fraction of the tax credit you miss will be made up for in a better car.

Don't lose any sleep over this, and congrats on making the jump

 

[TexasTeslaRacing]

Received an interesting email late tonight from a gallery advisor in Dallas, TX. I gather Tesla is expecting the federal tax credit to begin phasing out late this year and are pushing MS and MX sales over M3.

Email copied below:

Hi Xxxx,

My name is Xxx and I am a Tesla Gallery Advisor in Dallas. We are grateful for your Model 3 Reservation and your investment in sustainable transportation as well as contributing to the change of the automotive industry's dependence on fossil fuels.

2017 is going to be a big year for Tesla with several new products, including the roll-out of the vehicle that you placed a Reservation for, the Model 3. Until this year, our owners have been able to take advantage of the $7,500 Federal Tax Credit (IRC 30D) to make Tesla ownership more affordable. This credit will begin to phase out later in 2017 as we near the expiration of this benefit.

If you would like to take advantage of the $7,500 Federal Tax Credit (IRC 30D) prior to it’s anticipated expiration later this year, I would be happy to discuss next steps for a Model S or Model X. There are available inventory options for accelerated delivery and this will assure that you get this benefit. You can also custom build a new Model S or Model X as well. In addition to the Federal Tax Credit, you would be able to take advantage of the Referral Credit program, saving you $1,000 on your Tesla purchase of the Model S or Model X. For all new Model S or Model X owners that you refer through the Referral Program, you will earn Referral Program awards (Referral Program).

We welcome you to explore the new Autopilot features and some of the other new technologies and I can help schedule a drive experience so you can get a feel for the new technology. We are fortunate to have 3 convenient locations in the DFW area where you can schedule a drive experience in a Model S or Model X.

I look forward to hearing from you soon!

Electric Regards,

 

[erthquake]

Received an interesting email late tonight from a gallery advisor in Dallas, TX. I gather Tesla is expecting the federal tax credit to begin phasing out late this year and are pushing MS and MX sales over M3.

Email copied below:

Hi Xxxx,

My name is Xxx and I am a Tesla Gallery Advisor in Dallas. We are grateful for your Model 3 Reservation and your investment in sustainable transportation as well as contributing to the change of the automotive industry's dependence on fossil fuels.

2017 is going to be a big year for Tesla with several new products, including the roll-out of the vehicle that you placed a Reservation for, the Model 3. Until this year, our owners have been able to take advantage of the $7,500 Federal Tax Credit (IRC 30D) to make Tesla ownership more affordable. This credit will begin to phase out later in 2017 as we near the expiration of this benefit.

If you would like to take advantage of the $7,500 Federal Tax Credit (IRC 30D) prior to it’s anticipated expiration later this year, I would be happy to discuss next steps for a Model S or Model X. There are available inventory options for accelerated delivery and this will assure that you get this benefit. You can also custom build a new Model S or Model X as well. In addition to the Federal Tax Credit, you would be able to take advantage of the Referral Credit program, saving you $1,000 on your Tesla purchase of the Model S or Model X. For all new Model S or Model X owners that you refer through the Referral Program, you will earn Referral Program awards (Referral Program).

We welcome you to explore the new Autopilot features and some of the other new technologies and I can help schedule a drive experience so you can get a feel for the new technology. We are fortunate to have 3 convenient locations in the DFW area where you can schedule a drive experience in a Model S or Model X.

I look forward to hearing from you soon!

Electric Regards,

If this is true, I'd report them to corporate. The very earliest the full credit could end would be March 31, 2018, but June 30 is more likely. They shouldn't be giving you false info to drive a Model S/X sale. That's the supposed to be the whole point of Tesla's non-dealer experience.

 

[Troy]

This credit will begin to phase out later in 2017 as we near the expiration of this benefit.
If you would like to take advantage of the $7,500 Federal Tax Credit (IRC 30D) prior to it’s anticipated expiration later this year,

This is 100% wrong. I can guarantee you, it is not even theoretically possible for tax credits to drop from $7,500 to $3750 before 31st March 2018 and it is more likely that $7,500 will continue for deliveries until the 30th June 2018. According to the rules, it works like this:

• Step 1: Estimate the date Tesla will hit 200,000 USA sales.
• Step 2: Firstly, find the end of that quarter
• Step 3: Now find the end of the next quarter.

That's the date until the $7,500 federal tax credits will continue before it drops to $3,750 for two more quarters and then $1,875 for two more.

As of today, on 27th July 2018, Tesla has sold 134,416 cars in the USA and they are expected to hit 200,000 USA sales on 20th Jan 2018, based on my calculation. Hitting 200K on any day in Q1 2018 means full credits will continue until the end of Q2 2018 based on the rules explained on EPA's website here (scroll down and expand the phase out section).

For the latest information on this including a daily counter that shows Tesla's USA sales, you can open this page and scroll all the way to the right. Also, the Model 3 Delivery Estimator integrates this information to search results and presents the likely amount you might get based on your estimated Model 3 delivery date.

 

[derekmw]

Received an interesting email late tonight from a gallery advisor in Dallas, TX. I gather Tesla is expecting the federal tax credit to begin phasing out late this year and are pushing MS and MX sales over M3.

Email copied below:

Hi Xxxx,

My name is Xxx and I am a Tesla Gallery Advisor in Dallas. We are grateful for your Model 3 Reservation and your investment in sustainable transportation as well as contributing to the change of the automotive industry's dependence on fossil fuels.

2017 is going to be a big year for Tesla with several new products, including the roll-out of the vehicle that you placed a Reservation for, the Model 3. Until this year, our owners have been able to take advantage of the $7,500 Federal Tax Credit (IRC 30D) to make Tesla ownership more affordable. This credit will begin to phase out later in 2017 as we near the expiration of this benefit.

If you would like to take advantage of the $7,500 Federal Tax Credit (IRC 30D) prior to it’s anticipated expiration later this year, I would be happy to discuss next steps for a Model S or Model X. There are available inventory options for accelerated delivery and this will assure that you get this benefit. You can also custom build a new Model S or Model X as well. In addition to the Federal Tax Credit, you would be able to take advantage of the Referral Credit program, saving you $1,000 on your Tesla purchase of the Model S or Model X. For all new Model S or Model X owners that you refer through the Referral Program, you will earn Referral Program awards (Referral Program).

We welcome you to explore the new Autopilot features and some of the other new technologies and I can help schedule a drive experience so you can get a feel for the new technology. We are fortunate to have 3 convenient locations in the DFW area where you can schedule a drive experience in a Model S or Model X.

I look forward to hearing from you soon!

Electric Regards,

"since your reservation for our $35k car may not get $7500 off, buy our $85k car and get $7500 off now"

how tempting... lol

 

[LoL Rick]

Received an interesting email late tonight from a gallery advisor in Dallas, TX. I gather Tesla is expecting the federal tax credit to begin phasing out late this year and are pushing MS and MX sales over M3.

Email copied below:

Hi Xxxx,

My name is Xxx and I am a Tesla Gallery Advisor in Dallas. We are grateful for your Model 3 Reservation and your investment in sustainable transportation as well as contributing to the change of the automotive industry's dependence on fossil fuels.

2017 is going to be a big year for Tesla with several new products, including the roll-out of the vehicle that you placed a Reservation for, the Model 3. Until this year, our owners have been able to take advantage of the $7,500 Federal Tax Credit (IRC 30D) to make Tesla ownership more affordable. This credit will begin to phase out later in 2017 as we near the expiration of this benefit.

If you would like to take advantage of the $7,500 Federal Tax Credit (IRC 30D) prior to it’s anticipated expiration later this year, I would be happy to discuss next steps for a Model S or Model X. There are available inventory options for accelerated delivery and this will assure that you get this benefit. You can also custom build a new Model S or Model X as well. In addition to the Federal Tax Credit, you would be able to take advantage of the Referral Credit program, saving you $1,000 on your Tesla purchase of the Model S or Model X. For all new Model S or Model X owners that you refer through the Referral Program, you will earn Referral Program awards (Referral Program).

We welcome you to explore the new Autopilot features and some of the other new technologies and I can help schedule a drive experience so you can get a feel for the new technology. We are fortunate to have 3 convenient locations in the DFW area where you can schedule a drive experience in a Model S or Model X.

I look forward to hearing from you soon!

Electric Regards,

This sounds like someone dreaming up their own information just to try to make a sale. It borders on sleazy car dealer tactics and I don't think @JonMc would approve.

 

[CarlitoDoc]

I always assumed I will NOT get a Federal Tax Credit (even though I could definitely use it), if it happens.....great !

 

[Serge28]

Long time lurker, first time poster. Been lusting after Tesla ever since seeing Roadster as one of the top points buys in Full Tilt store almost a decade ago. Moved to California 3 years ago this month in part because of Tesla 3. My tax liability though is below $7,500. I'll be taking the delivery of the $35K base model in 2018 (Feb-Apr) to get as close to $7,500 as I can.

One of the possible options I've been looking into, to ease the financial burden next year, has been increasing the number of exemptions that I claim to decrease the amount withheld from each paycheck as much as possible. The extra funds would then go towards the increase in monthly car payments/insurance. Instead of receiving a refund in April 2019, the goal is to spread it out over 2018 with the expectation of higher earnings in 2019 compared to 2018 - thus directing the extra cash infusion to a time when it's more needed.

However, I have run into some conflicting information in my research online and of this forum:

1) $7500 Credit and Adjusting Tax Withholding 02/17/2014:

your employer cannot tell you how many exemptions you can claim. When I had a situation where I needed withholding stopped, I simply submitted a W-4 claiming 99 dependents. Yes, you can do this. From: a 20 year practicing CPA. Happy to field questions if need be.

2) Tax Credit Clarification 06/14/2016:

You can mitigate this somewhat if you have tax withheld from your paycheck by updating your W-4 with your employer to have 9 exemptions (the max you can do without actually proving you have that many kids!) and having less tax withheld with each paycheck. Just don't forget to revert to normal next year!

3) How to plan for maximizing tax credit? 03/14/2017:

You cannot make a lump sum payment at the end of the year without being subject to a 2210 underpayment penalty (2210 is the form used to calculate the underpayment penalty). The government wants their money in roughly even payments throughout the year, either in withholding or 4 equal quarterly estimates.

To avoid the 2210 penalty, you must:
1 - Pay 90% of the total tax due OR 110% of the prior year's tax bill
2 - AND make your payments through withholding or equal quarterly estimates (a payment with your return by Apr 15th is considered a Q4 estimated payment)

Paying nothing during the year and paying it all with the return will owe a penalty. If you aren't paying the penalty, you aren't calculating the 2210 correctly and haven't gotten caught.

Thoughts?

 

[SageBrush]

Thoughts ?

Read the tax thread sticky, you have a basic misunderstanding of tax liability.

 

[Serge28]

Read the tax thread sticky, you have a basic misunderstanding of tax liability.

I think I have a pretty good understanding of tax liability. Would you care to elaborate?

 

[obe1]

Not a tax expert, just have had to pay this penalty in the past. My situation is different.


From what I have understanding is as follows:

The underpayment penalty only applies if you own any taxes. Seeing as how you will not have a liability above 7,500$, if you take the $7,500 credit your tax liability will be zero. So there will be no penalty. There is no carry over of this credit so do your best to have a $7,500 liability. Any you don't use will disappear.

If you calculated wrong and do owe taxes after the credit then you will pay approximately %2 on the tax not paid yet, late. So sure change your withholding so they don't take any money.

Again not a tax expert, so I might be missing something. So don't blame me if my advice causes you issues.

 

[boaterva]

And you don't even need to calculate exemptions to get your withholding balanced over the year to not get the whopper refund.

If you *know* what you want withheld added on to your normal amount for that year (7500/12, 7500/26, whatever), you can put that exact amount on the W-4 form. 'Withhold extra amount per pay period' or whatever the language is. I did this back when when I wanted to have extra withheld and it wasn't a 'person' amount.

 

[Runt8]

In addition to what others have said, you can put any number of exemptions you want on the form. The IRS only cares about how much money you send them compared to how much you owe.

 

[RandyS]

We're missing some information that could be used to provide advice....

When you say that your tax liability in 2017 is not at the $7,500 level, how close to $7,500 are you?

And in 2018, what do you expect your tax liability to go up to?

How many exemptions are you claiming now?

 

[dsvick]

I'm not sure what it is that you're confused about. You posted a bunch of quotes from other people but didn't ask a question.

If there is any doubt or confusion you would be better off consulting a tax professional as opposed to a bunch of strangers on the internet...

 

[trm2]

You are right about increasing your exemptions to decrease the tax withheld from your paycheck. It is a sound strategy also. Here is a calculator from the IRS that may help you figure things out. (talking to a tax professional is still a good idea)

2017 Withholding Calculator

 

[sleepyhead]

Your case is very simple. In 2018 your tax liability will be less than $7500. But you expect to qualify for full $7500 credit. This means your tax liability will be $0 next year. Find a way to minimize your tax withholdings to as close as $0 beginning January 2018. There is a box on W4 forms that allows you to exempt yourself from withholding. But it says that you would need $0 tax liability in 2017 and expect $0 in 2018 to use it, and it doesn't sound like you will. Therefore increase your exemptions as much as legally possible to get as close to $0 as you can.

Edit: just wanted to add for clarification that we are talking about 2018 tax year, for which you will be filing your tax return by April 15, 2019.

 

[trm2]

Your case is very simple. In 2018 your tax liability will be less than $7500. But you expect to qualify for full $7500 credit. This means your tax liability will be $0 next year. Find a way to minimize your tax withholdings to as close as $0 beginning January 2018. There is a box on W4 forms that allows you to exempt yourself from withholding. But it says that you would need $0 tax liability in 2017 and expect $0 in 2018 to use it, and it doesn't sound like you will. Therefore increase your exemptions as much as legally possible to get as close to $0 as you can.

Edit: just wanted to add for clarification that we are talking about 2018 tax year, for which you will be filing your tax return by April 15, 2019.

To clarify, if your tax liability is less than $7,500, you will NOT get the full $7,500 credit, you will get whatever your liability is and no more.