SageBrush
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Do you know why it is done this way rather than for instance, treating it as a cap reduction ?
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Tax Credit Clarification
- Thread starter SmarterMotors
- Start date
Not really, but it may have happened around the same time that they reduced the monthly payments to make them more affordable.
In reality why should you get the benefit of the tax credit if you don't even qualify for all of it, if even any of it?
SageBrush
REJECT Fascism
Perhaps I'm mistaken, but I think either of increasing the residual or adding to the cap reduction reduces the monthly payment.
Yeah, let's give it to the leasing company
This car will not be 35K. The Model S started out at 70K but most buyer ended up paying close to 100K. Why? The options.
There's a lot we don't know but take for example they mention auto pilot hardware comes with the car but they don't talk about the software cost. We need to factor in the battery or maintenance care package. For the 8 years that's another 4k
Service plans
This is why Elon hinted that average cost should be around 42K. Fully loaded will be close to 60K. I know we are going off topic but the tax incentive is a bonus to off set some of the cost.
Thanks Smarter Motors - I hope you are right. I have to paid tax every years. Every little bit help. What do you think about claiming more dependencies to increase your tax liability and maximize all the tax credits? Since you can't roll over for the following years to claim.
deonb
Active Member
Why would claiming more dependencies increase your tax liability?
If you need to roll the tax over multiple years, the best strategy is still to pay into a traditional IRA (pre-tax) over multiple years, and then convert it to Roth IRA when you get the Model 3.
You actually can still contribute to a 2015 IRA for the next 4 days. Not that it probably matters. Two years of IRA at the limits is more than the tax credit.
Can anyone else expand in more way on how to increase you tax liability?
I have increased my numbers of dependents from 0 to 3 to increase my tax liability because I purchased Solar Panels this year. I also try to max out our traditional IRA's every year.... I am worry about not been able to have enough tax liability.
Thanks for the tip deonb
SageBrush
REJECT Fascism
The IRA tax benefit is a deduction, which is not the same as the credit attached to EVs.
If the decision to use an IRA deduction rather than a Roth had merit at the time, then converting to a Roth has an opportunity cost that should be considered when deciding whether to go that route to claim the EV credit. Or put another way, you are giving up past savings to get EV savings. E.g., in my case my health insurance premium amount is tied to income, so converting an IRA to Roth will cost me the marginal federal income rate, state income rate, and ACA which work out for me to a 30% surcharge. The ACA cannot be recouped down the line; the federal and state taxes might be offset by not having to pay them on the IRA later, but that again depends on specific tax planning.
I presume most people in this situation of not having enough tax liability as a normal matter are in the 15% federal tax bracket, and pay 5-10% state taxes. So the cost of this strategy is 20 - 25%, plus ACA if relevant.
Another way to frame this question of an IRA conversion to Roth: is the Roth advantage over an IRA worth the conversion costs, and how much benefit is there ?
Color me skeptical, in general
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If you are talking about on your W-4, that doesn't increase your tax liability, that reduces your withholding which either reduces your refund, or increases what you have to pay, when you file taxes. It won't change how much of the tax credit you qualify for.
I'm not sure how so many people expect to reap this tax benefit. The way I see it (numbers are approximate):
- 2500 roadsters
- 135000 model s (highest delivery I could find was 134 something)
- 2000 model s (vin 941 of production, + ~1000 sigs)
Total: 138500
Assuming a 1k build rate per week (sorry, don't have the source, but pretty sure Elon said this on an earnings call) and ramping up, that's +39k cars this year.
End of 2016: Total 177k
End of Q1 17: Total 190k
End of Q2: Total 203k
IMO, by the time the first model 3 rolls off the line, we'll be at half to a quarter of the original credit.
- 2500 roadsters
- 135000 model s (highest delivery I could find was 134 something)
- 2000 model s (vin 941 of production, + ~1000 sigs)
Total: 138500
Assuming a 1k build rate per week (sorry, don't have the source, but pretty sure Elon said this on an earnings call) and ramping up, that's +39k cars this year.
End of 2016: Total 177k
End of Q1 17: Total 190k
End of Q2: Total 203k
IMO, by the time the first model 3 rolls off the line, we'll be at half to a quarter of the original credit.
Please read the thread first. You are looking at total Tesla production numbers, and only the ones delivered in the US count, which is about 50% of them.
It is possible, but you will greatly increase the chances if you opt for a highly optioned version. But we won't know for sure for over a year.
You would want to reduce the amount you contribute towards your IRA in the tax year that you will take ownership of your Model 3. Contributing to your IRA lowers your Taxable Income, which normally is a good thing. However, in this case we actually want a higher taxable income (tax liability) so we can take advantage of the tax credit. From my experience back in 2013 when I bought my Cmax Energi, the tax credit is applied first before any payments/withholdings. That way, any payments or withholdings you made are refunded (not the tax credit itself).
An additional way you can increase your tax liability for one year is to sell some stocks and take the capital gains as earned income which would raise your tax liability or a better way is to convert some of your traditional IRA into a Roth IRA. You will need to take a tax penalty, but if you can calculate out the amount you are short to maximize the tax credit, convert that much from a traditional to a roth and you should be set. Sounds easier said then done but those are just a few ways to maximize the tax credit.
Please remember, Roadsters don't count. They were built before the credit.
Thank you for your reply. Will I be able to cancel and get my deposit back if I am not one of the first 200,000?
If the tax credit is taken before any payments or withholdings I should be good.
The number I should be looking at is "Regular Taxes" in the turbotax forcaster :TurboTax® TaxCaster, Free Tax Calculator, Free Tax Refund Estimator correct?
I might do a Roth IRA next year if I don't have enough tax liability to help out.
Remember that after 200k, Tesla delivers for the rest of that quarter and the next quarter before starting to phase out the credit. It doesn't disappear. The total number of cars that will get some credit will be well over 200k.
That said, yes, you can cancel so long as you haven't already configured and hit the "order" button. And you'll get your money back.
SageBrush
REJECT Fascism
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