Tax Credit Clarification

[Thomas Edison]

With the way things have been lately you have a lot of people in their mid 20's who can afford this car if they don't have rent or mortgage (who still live at home). I'm not saying there's anywhere near a majority out there but in middle America I think the numbers add up. They are thinking they have 3 years to figure it out so they plopped down $1000 and they will reevaluate when their time comes. I know of people who had $35 audis and bmws right out of college who still lived at home. Just my 2¢

Sure but not one is saying they should be an Audi or BMW instead...if you're making $40k/year the reasonable choice is maybe a few year old $10k used car in good mechanical shape. You'll have some maintenance but it's not going to be even close against a new model 3...

 

[MP3Mike]

And "owe" doesn't mean at the end of the year, that means what you paid the fed. Check your pay stub for the current annual total.

Well what you paid/the number on your pay stub doesn't count either. The amount that counts is your total tax liability at the end of the year.

 

[Thomas Edison]

I agree with you, it isn't the smartest option as far as retirement goes. But people make their own decisions.

Trump 2016

It means you can plausiably afford if you don't need to pay for rent/food/whatever, it does not make it a wise financial decision to be spending that kind of cash on a new car vs maxing out 401k/Roth Ira/etc

 

[Thomas Edison]

If you file correctly then you should be able to go off that as an indicator, not direct but a ballpark figure to see if you can get the rebate. No?

Well what you paid/the number on your pay stub doesn't count either. The amount that counts is your total tax liability at the end of the year.

Well what you paid/the number on your pay stub doesn't count either. The amount that counts is your total tax liability at the end of the year.

 

[Jaybert]

With the way things have been lately you have a lot of people in their mid 20's who can afford this car if they don't have rent or mortgage (who still live at home). I'm not saying there's anywhere near a majority out there but in middle America I think the numbers add up. They are thinking they have 3 years to figure it out so they plopped down $1000 and they will reevaluate when their time comes. I know of people who had $35 audis and bmws right out of college who still lived at home. Just my 2¢

Agreed it happens and getting a model 3 is probably better than an Audi/BMW if those are the only choices, but having the money available because you live at home and don't have housing or food expenses still doesn't make it a good financial decision.

Everyone's an adult and can spend their money as they please but just speaking as someone whose a bit older (early 30s) it doesn't seem wise to put so much of your money into a quickly depreciating asset

Edit: I should mention I spent a bunch of money when i was straight out of college on some dumb things and still do I suppose.

 

[SmarterMotors]

I'm a recent college grad and am not tax-savvy whatsoever. So you're telling me, because I don't make $47K a year (or even half that amount), I can't even get the $7500 tax credit? So I'm essentially paying more than someone else because I earn less?

You still get the tax credit, but you probably are not going to use up the full $7500. For example, if you make $25,000 a year that means your federal income tax is $4788.75. So you can apply your $7500 tax credit against that (meaning you will get a refund of the entire $4788.75 from the IRS if your taxes were prepaid through payroll / if you have some extra tax liability you use that credit to pay the bill).

The difference ($2711.25) is left on the table and the IRS just eats that away. Some unused tax credits can roll over into future years...but NOT this one. It is a use it or lose it type of tax credit.

So you still get the credit, you just don't optimize its full use. Your state may have a REBATE or a TAX CREDIT too. Oh for people who do not qualify in California, you can always buy the vehicle under your company because the income limits do not apply to businesses. I confirmed with the State of California.

BTW before someone calls me out on it, I am using Tax Bracket Calculator - TaxACT to make rough calculations. Actual taxes are complicated and you gotta take into consideration all the deductions and other stuff available to reduce the tax liability.

 

[souslik]

There is a 2015 US sales figure in the Tesla Q4/2015 shareholder letter where they compare Tesla Model S sales to competitor sales: It says 25'202 and with total Production of 50'000 vehicles in 2015 that makes about 50%.

http://files.shareholder.com/downlo...3C-4892824F058D/Q4_15_Tesla_Update_Letter.pdf

I was just wondering where you got the half of all model S were sold in the USA? I have been trying to find some concrete numbers so that I could make a truly educated guess myself. I don't see anywhere that Tesla officially broke down sales by country.

I wonder if there is some type of auto-database where I can see all Teslas on the Road today to get a better gauge. If anyone has solid data please send it my way. I am a geek...I like running numbers and creating formulas

 

[HenryNDH]

Since we are on the subject of tax rebates, I would like to know if there is any limit on the maximum amount of credits assuming the vehicles are still eligible (I have pre-orders for 2, and did it at the store in San Jose on 3/31). Thanks for sharing the information - I checked IRS website but did not find any reference to the max amount of credits.

 

[SmarterMotors]

Agreed it happens and getting a model 3 is probably better than an Audi/BMW if those are the only choices, but having the money available because you live at home and don't have housing or food expenses still doesn't make it a good financial decision.

Everyone's an adult and can spend their money as they please but just speaking as someone whose a bit older (early 30s) it doesn't seem wise to put so much of your money into a quickly depreciating asset

Edit: I should mention I spent a bunch of money when i was straight out of college on some dumb things and still do I suppose.

I agree. You gotta enjoy life sometimes and live a little BUT being smart with money is also important. Just gotta find the balance between the two. If someone makes $35K a year, lives with their parents, has little liabilities/debt, and wants to splurge...I say why not. At worst sell the car because a Tesla should retain decent value.

I don't know how much the lease/finance would be for the Model 3 but I am sure it is affordable for a $15/hr individual.

However, if you are living off food stamps, DON'T BUY A TESLA!!! Haha, your going to end up living in the car. However, a positive is that if your going to live in it, there seems to be a lot of storage space.

In all seriousness, buyers should totally evaluate their finances. As long as you can afford it and have an exit strategy in case it doesn't work out, then go for it. We are all adults and can make our own decisions.

 

[mistermonty705]

aside from those people who are retired/not currently making money in the calendar year they purchase, how/why are people purchasing this car if you don't have $7500 tax liability per year? We're talking a $35k minimum car...doesnt seem like a wise financial decision to purchase a car that's 75%+ of your gross yearly salary.

I am one of those people. I think a lot of millennials are misunderstood. A lot of us do save for our future and budget for purchases like these.

I have already saved the tax credit amount in my car budget savings account (I have 2 savings. one for a car and one for down payment on a home when I am 25). With my current plan I will have more than enough to afford this car by the time it is released.

For what it is worth, I plan on leasing and then purchasing a new model once my lease is over. Additionally my credit score is in the mid 700s. I just paid down 2/3 of my credit cards so I am hoping to get it higher.

I am technically paying 2 leases right now. Plus insurance ( which costs more than my lease )

However, with my savings plan, I have it set up so that I can pay my insurance upfront. This helps to avoid an additional monthly payment.

 

[mistermonty705]

also, I moved back home to save money. Shortly after I moved home I got a promotion.

I am 22 by the way. I am trying the whole Dave Ramsey plan. Plus my grandfather is a CPA. So I learned about these things early.

I miss making double a year though . However, my current job is less stressful and provides better work/life balance.

 

[SmarterMotors]

There is a 2015 US sales figure in the Tesla Q4/2015 shareholder letter where they compare Tesla Model S sales to competitor sales: It says 25'202 and with total Production of 50'000 vehicles in 2015 that makes about 50%.

http://files.shareholder.com/downlo...3C-4892824F058D/Q4_15_Tesla_Update_Letter.pdf

Thanks for sharing. Great find. You are right, in 2015 approximately 50% of all Model S were delivered in the US based on that data. Honestly...way more than I thought.

 

[SmarterMotors]

I am one of those people. I think a lot of millennials are misunderstood. A lot of us do save for our future and budget for purchases like these.

I have already saved the tax credit amount in my car budget savings account (I have 2 savings. one for a car and one for down payment on a home when I am 25). With my current plan I will have more than enough to afford this car by the time it is released.

For what it is worth, I plan on leasing and then purchasing a new model once my lease is over. Additionally my credit score is in the mid 700s. I just paid down 2/3 of my credit cards so I am hoping to get it higher.

I am technically paying 2 leases right now. Plus insurance ( which costs more than my lease )

However, with my savings plan, I have it set up so that I can pay my insurance upfront. This helps to avoid an additional monthly payment.

NICE! Two thumbs up to you. If you enjoy leasing your vehicles you should look at utilizing a Multiple Security Deposit (MSD) to lower the Money Factor a.k.a. Interest. Some car manufacturers allow MSDs to lower the interest rate and your deposits are guaranteed. So you can view it as a risk free investment because they have to return it to you even if you total the vehicle. For example, on my current BMW 528i, instead of putting money down as a cap cost reduction, I used it as a MSD and my total ROI was 51.57%. I put down $3500 and received $1804.89 in total savings (51.57% ROI)

I do not know if Tesla offers a MSD program but I will for sure check once they call me in to build the car. If you like to lease cars check out this calculator:

Smarter Motors

^^I am a geek . I built this calculator and wrote a short article about my opinions on finding the best lease deals. I felt like I got a pretty sweet deal. My 2015 528i has a $58,750 MSRP, $0 down, $3500 MSD, total is $454.13/mo before taxes. Check it out if you like leasing.

 

[JoeCoolMan24]

I am one of those people. I think a lot of millennials are misunderstood. A lot of us do save for our future and budget for purchases like these.

I have already saved the tax credit amount in my car budget savings account (I have 2 savings. one for a car and one for down payment on a home when I am 25). With my current plan I will have more than enough to afford this car by the time it is released.

For what it is worth, I plan on leasing and then purchasing a new model once my lease is over. Additionally my credit score is in the mid 700s. I just paid down 2/3 of my credit cards so I am hoping to get it higher.

I am technically paying 2 leases right now. Plus insurance ( which costs more than my lease )

However, with my savings plan, I have it set up so that I can pay my insurance upfront. This helps to avoid an additional monthly payment.

I make only $13/hr, but I also live at home in the midwest where cost of living is cheaper than the Cali folks here. I won't be living at home when the Model 3 comes out, but I've already started up a separate "Tesla" savings account that I auto-pay $300 a month from my checking in to to start saving now. Also dumping my tax returns each year in to my Tesla fund. Hoping to have $10K+ to make towards my first payment. It's not going to be easy, but as someone who never spends money and is constantly saving, I am itching to finally spoil myself on a car I have been telling people I will own since 2008. Luckily I have parents who live comfortably in the upper-middle-class if I TRULY got myself in a bad financial situation. But I think I'll be just fine on my own.

 

[JoeCoolMan24]

One more credit-tax question....

Let's say I don't qualify for the full $7500. Is it possible to just have my parents buy the car, to qualify for the full credit, and then I just "buy" the car from them after they claim the car on their taxes the following February?

 

[Config]

The true total cost of an electric car is way less than one with an ICE.

Here's Tesla's Service plan. Service plans

 

[mistermonty705]

NICE! Two thumbs up to you. If you enjoy leasing your vehicles you should look at utilizing a Multiple Security Deposit (MSD) to lower the Money Factor a.k.a. Interest. Some car manufacturers allow MSDs to lower the interest rate and your deposits are guaranteed. So you can view it as a risk free investment because they have to return it to you even if you total the vehicle. For example, on my current BMW 528i, instead of putting money down as a cap cost reduction, I used it as a MSD and my total ROI was 51.57%. I put down $3500 and received $1804.89 in total savings (51.57% ROI)

I do not know if Tesla offers a MSD program but I will for sure check once they call me in to build the car. If you like to lease cars check out this calculator:

Smarter Motors

^^I am a geek . I built this calculator and wrote a short article about my opinions on finding the best lease deals. I felt like I got a pretty sweet deal. My 2015 528i has a $58,750 MSRP, $0 down, $3500 MSD, total is $454.13/mo before taxes. Check it out if you like leasing.

I will definitely look into that. Thank you! This is nice to hear since I totaled my first car, which I financed. It was an unfortunate accident, not due to reckless driving. I did not have gap insurance so I had a balance with Hyundai. Since I was getting another Hyundai, they rolled my balance into my new lease. I did not pay anything upfront and my current payments are $283 monthly, plus $315 for insurance. So I am very nervous to finance again lol. I need to lease one more time prior to making a commitment.

I made sure to get the insurance part figured out first. It makes the tesla payments look like spare change

 

[mistermonty705]

I make only $13/hr, but I also live at home in the midwest where cost of living is cheaper than the Cali folks here. I won't be living at home when the Model 3 comes out, but I've already started up a separate "Tesla" savings account that I auto-pay $300 a month from my checking in to to start saving now. Also dumping my tax returns each year in to my Tesla fund. Hoping to have $10K+ to make towards my first payment. It's not going to be easy, but as someone who never spends money and is constantly saving, I am itching to finally spoil myself on a car I have been telling people I will own since 2008. Luckily I have parents who live comfortably in the upper-middle-class if I TRULY got myself in a bad financial situation. But I think I'll be just fine on my own.

You're on the right track! Save save save. You will thank yourself later.

I am in a similar situation. I actually left Cali due to the cost of living . Even though I am back home Cali still finds a way to get money from me. In order to move up in my company or pursue my dreams I will probably have to move back next year.

 

[SmarterMotors]

One more credit-tax question....

Let's say I don't qualify for the full $7500. Is it possible to just have my parents buy the car, to qualify for the full credit, and then I just "buy" the car from them after they claim the car on their taxes the following February?

I think that is a decent strategy. There is some stuff in the code about it having to be for personal/business use and not intended for resale BUT how the heck is IRS going to find out and are they seriously going to audit you out of millions of other people. I know some people in this forum will get crazy on me but technically your parents bought it for their personal use, no longer want it, and sold it to you. There is nothing in there that says you have to hold it for a certain time period to be eligible.

What about purchasing with your parents? That way everyone is on there and can drive the vehicle. I don't think they will allow pro-rating the credit among the owners but instead only 1 of the owners must claim the entire credit.

Run these creative strategies by your accountant =). Since your accountant will be helping you with the IRS Form 8936 to claim the credit, he will be your best resource on these technicalities.

 

[jerry33]

Do you really think the person making $15/hr has enough, or any, in an IRA to be able to create enough tax liability?

How many of those making $31,200/year are going to be purchasing a $35+K car? Only if they are single and live with their parents.