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Tax Credit Clarification

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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.

INTERESTING...It does not seem like I can edit a post after it has been made. Sorry but I made a typo on the "If you make $25,000 a year". The figures shown in this example are if you make $35,000 a year.
 
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.



Great point, I hope people realize they are not going to get $7500 back from the IRS just because they bought a Tesla. (I think most uninformed people are thinking they may get a tax refund instead of a tax credit.)
 
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.
The credit score updates monthly, so the utilized to available_credit ratio does not matter now. And you can always grab another card if that is the issue.

Or do you mean that you paid down a debt that you carry and pay interest on ? If that is the case then having a 'car savings bucket' while paying credit card level interest rates is a poor strategy.
 
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I did when I was making $15 an hour :p you just have to be a saver or an investor to temporarily jump your tax liability enough. I won't come close to the full $7500 unless I do a trick like that.
Or have a forced or 'to good to refuse' 401k through work that can be rolled over after switching jobs.

Exceptions can exist, but they are going to be uncommon.
 
Well we need to consider that there is demand for this vehicle all around the world. Not all of these pre-orders are in the USA. Lets assume that 25% of all orders are USA, then at the 276,000 preorders we are still at 69,000 and of those not all of them will convert into sales so anyone pre-ordering now still has a good chance...

Also for the taxes...yeah, you need to have at least $7500 in tax liability. So the guy making $15/hr is not going to have that. However, a strategy could be converting your traditional IRA to a ROTH IRA and using the tax credit to pay off the tax for conversion. A ROTH IRA is pretty sweet because all the draws that you take at retirement is tax free instead.

That was actually something I have been thinking about. How many people ordering this car will be able to take advantage of the tax credit?
 
I'm in the 'how do I take advantage of the Federal tax credit' group of people too [assuming it is available], because I funnel most of my company revenue into tax advantaged retirement savings plans rather than take it as taxable salary.

My solution is to lease the car.
 
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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?


Remember you would also need to get Tesla's written permission to transfer your registration number to whomever will actually be buying the car. If it's your parents (as opposed to complete strangers), that probably won't be a problem.

Also, if your parents "sell" you a $35k car the following February even for a nominal $1, there's a possibility the sales tax man in your state would want to be paid sales tax based on the fair value of the car (not what you claim as the sales price on the title transfer). Many states have exemptions for family transfers of title but it's something you should double check.
 
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Thanks for breaking it down to make it easily understandable for the uninformed. The 15 month period you refer to is the absolute minimum that the tax credit will be valid. More likely, it will stretch out to 18 months, since Tesla will have the capability of manipulating production and delivery. For example, if the 200,000th car is delivered on 1/1/18, the full credit will be valid for the remainder of that quarter, 3/31/18, as well as the following quarter ending 6/30/18. Then, there will 6 months of 50% credit, followed by 6 months of 25% credit.

Assuming that 1/1/18 is the date for the magical 200,000th car, the credit slate will look like this:

1/1/18 - 6/30/18 = 100% tax credit ($7,500)
7/1/18 - 12/31/18 = 50% tax credit ($3,750)
1/1/19 - 6/30/19 = 25% tax credit ($1,875)
Total of 18 months

If the unthinkable happens and the 200,000th car is delivered on 12/31/17 (just one day earlier), we would lose essentially 3 months of full credits. It would then look like this:

12/31/17 - 3/31/18 = 100% tax credit ($7,500)
4/1/18 - 9/30/18 = 50% tax credit ($3,750)
10/1/18 - 3/31/19 = 25% tax credit ($1,875)
Total of 15 months

I'm sure that Tesla will "manage" production so that the 200,000th car will end up closer to the first scenario, rather than the second.
I hope your right on your estimates, but to me, it seems like there will be very few, if any Model 3 owners that will get the full tax credit. I could be completely off base, so feel free to shoot down my numbers if they're incorrect:

As of the end of 2015, there have been almost 107,000 Tesla's delivered (2658 in 2012, 22,450 in 2013, 31,655 in 2014 and just over 50k in 2015). That means they only need to sell 93k more cars to hit that threshold. 2016 guidance has them delivering 100k.

Elon is a man of his word, so lets assume that he'll hold off delivering the 200,000 car until 1/1/17 (which would make them lose out on about 7k sales in forth quarter of 2016), the schedule looks more like this:

1/1/17 - 6/30/17 = 100% tax credit ($7500) - however, no Model 3 owners would get this
7/1/17 - 12/31/17 = 50% tax credit ($3750) - The very first Model 3 owners would get this
1/1/18 - 6/30/18 = 25% tax credit ($1875)

So, if we break this down, the factory where these will be made, at full scale, should be able to pump out 500,000 cars a year (though, some have said that's a high estimate). They'll likely only be at 20-40% capacity when they first start rolling cars out, so I think a fair guess would be about 7k Model 3 deliveries in the final quarter of 2017 (50% tax credit). If they make it to full capacity by the start of 2018 (which is probably unlikely), they would be able to pump out about 41k cars a month, so would be able to deliver 246k cars at the 25% tax credit.

Like I said, my numbers could be off - so feel free to correct me, but I don't think people shouldn't be making this purchase solely based on getting the full, or even half, of the tax credit (I think it's just an amazing car, so will be happy to fork over the full amount).
 
Even though I can afford this car, I still cringe about the thought of buying a "new" car. Almost every vehicle I've owned has been pre-owned or CPO'd, just because I don't want to be the sucker who takes the initial depreciation. Having said that, I am quite curious about the depreciation curve of these vehicles versus their ICE counterparts. I've followed prices for pre-owned Model S cars online (both at the Tesla store and on Cargurus.com). Overall I noticed a smaller depreciation curve compared to similar year/class cars (especially for the CPO'd cars on the Tesla website store). Any thoughts??
 
As of the end of 2015, there have been almost 107,000 Tesla's delivered (2658 in 2012, 22,450 in 2013, 31,655 in 2014 and just over 50k in 2015). That means they only need to sell 93k more cars to hit that threshold. 2016 guidance has them delivering 100k.

I didn't think there were that many US deliveries yet. Where are you getting your numbers from?

While they may deliver 100k cars this year, figure at least half of them will be non-US cars that don't count against the 200k limit.
 
I have seen so many articles stating incorrect facts on this very subject. CNN money posted an article today saying a lot of the people who preordered would not be getting the tax. It doesn't matter to me whether I get the tax or not because I wouldn't put it towards the cost of the car anyways. It does make you wonder though if there are "certain"companies lining the media's pockets to get them to scare people off.
Typical media attention grabbers. They know this is a popular topic, so they post a BS article knowing people will click on it for the traffic and ad revenue. Ignore the BS.
 
I didn't think there were that many US deliveries yet. Where are you getting your numbers from?

While they may deliver 100k cars this year, figure at least half of them will be non-US cars that don't count against the 200k limit.
No, you're exactly right! My numbers were worldwide, so completely off (I'm glad I stated it could be wrong :)). Thanks for pointing it out. I'll try and find real US only numbers.
 
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I had a weird thought: wouldn't it be great if Tesla would poll all those in the US that made a pre-order, or include a question in "My Tesla", that would ask each person whether they expect to qualify for the tax credit. Something like:
A. Yes, I have enough tax burden to get the full $7500 tax credit.
B. I expect to have enough tax burden to get between $3750 and $7500 tax credit.
C. I expect to have enough tax burden to get between $1875 and $3750 tax credit.
D. I expect to have enough tax burden to get a partial tax credit, but <$1875.
E. I do not expect to have enough tax burden to qualify for any of the tax credit.

That would allow Tesla to stage the cars equivalent to how much tax credit each buyer can receive, instead of wasting production on those who aren't able to get full, or any, credit. The BIG issue with this is that if people know that there car will be delayed because they don't get the full tax credit, they will all say that they do get $7500, just to get their Model 3 first.
I told you it was a weird thought. :confused:
 
I didn't think there were that many US deliveries yet. Where are you getting your numbers from?

While they may deliver 100k cars this year, figure at least half of them will be non-US cars that don't count against the 200k limit.
Since Tesla doesn't release exact numbers, Forbes is estimating that half of all deliveries are US - meaning my numbers would be off by a year (and putting them back to where the original poster put them)
 
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