Tax Credit Clarification

[MP3Mike]

As soon as tax incentive phaseout begins, it'll make sense to produce a large proportion of Model 3 for US customers during the following 15 to 18 months. I hope they'll deliver a lot of pre-phaseout cars to europe when they are still speeding up production thus postponing the begin of the phaseout so they can produce more cars during the phaseout period. However I think those pre-phaseout production adjustment deliveries will mostly go to canada because it's closer and early deliveries being closer to the factory seems to be Elon's plan.

That is a nice idea, but I doubt they will do that. If they did I suspect that most of them would go to Canada/Mexico..

 

[SmarterMotors]

@SmarterMotors; just to clarify, are the phase out periods limited in the amount of vehicles that can apply? Or just by time, starting off at the delivery of the 200,000th vehicle? I'm assuming Roadster, Model S and Model X are included in the 200,000, is that correct?

Hey Alex,

It is based on time. The time that the 200,000th vehicle sold is when the phaseout process starts. So technically Tesla could sell 1 million Model 3's that are eligible for credits and as long as they are delivered within the timeframe it will be eligible for some credit ($7500, $3750, or $1875).

Yea, the trigger number is ALL of the vehicles that it sold after January 1, 2010 (I think the roadster launched in like 2008 or something).

So it just all depends. But Elon is a smarty...he knows this and will do his best to ensure most Model 3 purchasers get some tax credit. Elon suggested that in a tweet earlier this week.

 

[Thomas Edison]

I wonder if they can be "sold" and not made or delivered. Then everyone after the 200,000th can get the credit and just wait. Just a thought.

 

[SmarterMotors]

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

True. Good point . I would have preferred the IRS to allow rollover credits. Lower earners may have some trouble applying the full $7500.

Tax Bracket Calculator - TaxACT

^^According to the above you gotta make at least $47K to pay $7500 in taxes.

 

[MP3Mike]

I wonder if they can be "sold" and not made or delivered. Then everyone after the 200,000th can get the credit and just wait. Just a thought.

Nope, they have to be delivered. But Tesla could build up a stock over months and then deliver them all at once. (Assuming that they could afford to have that much capitol, and space, tied up.)

 

[Thomas Edison]

That shouldn't be too difficult with two people filing joint tax returns. (Even at $15 an hour)

True. Good point . I would have preferred the IRS to allow rollover credits. Lower earners may have some trouble applying the full $7500.

Tax Bracket Calculator - TaxACT

^^According to the above you gotta make at least $47K to pay $7500 in taxes.

 

[SmarterMotors]

To be perfectly honest, tax credits were not a purchase/reservation consideration for me. Sure, they're nice to have, but they're strictly "icing on the cake" of going oil-free and advancing EVs. If they're still around by the time mine arrives, great. If not, no big deal in my book.

Ditto. Me too. The tax credits sweeten the deal but I was going to get it regardless anyways! *high five*

 

[MP3Mike]

^^According to the above you gotta make at least $47K to pay $7500 in taxes.

Assuming no other deductions/credits/dependents/married/etc. (Being married ups the number to ~$56k)

 

[JoeCoolMan24]

True. Good point . I would have preferred the IRS to allow rollover credits. Lower earners may have some trouble applying the full $7500.

Tax Bracket Calculator - TaxACT

^^According to the above you gotta make at least $47K to pay $7500 in taxes.

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?

 

[Thomas Edison]

Have you seen the lot for the battery factory? Just have them all auto pilot there like a road train and wait collecting dust. They can use some of the $250 million from the reservations to pay people to keep them clean.
Or just hook a sham-wow to the end of the robot charging snake and put it on a roomba.

Nope, they have to be delivered. But Tesla could build up a stock over months and then deliver them all at once. (Assuming that they could afford to have that much capitol, and space, tied up.)

 

[MP3Mike]

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?

Yep! But you would qualify for some of it. (It is $7,500 or how ever much you owe in total federal taxes for the year, whichever is less.)

 

[Thomas Edison]

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.

Yep! But you would qualify for some of it. (It is $7,500 or how ever much you owe in total federal taxes for the year, whichever is less.)

 

[Jaybert]

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.

 

[SmarterMotors]

I think the ratio is probably the other way around. Most Tesla production is for the US market - I think I read somewhere that about 25% was in California - with Europe and Canada taking the lion's share of the rest. I don't think Tesla has published delivery destination figures, but there must be someone who has worked it out pretty closely.

Yea...my 25% comment was just a random guess to show that all the pre-orders was not in the USA as some people are so concerned about holding high reservation number. A high reservation number is high overall but your place to get tax credits are still probably pretty darn good.

I don't know exactly how many Tesla's was delivered in the USA to date and I do not know how many of the Model 3 pre-orders were for the USA. But I do know that Elon intends to deliver to whoever is closest to its Fremont, California factory which means he should fill a ton of US deliveries first.

Everyone is literally just guessing when it comes to deliveries by region so even the smartest of the smarts is still pulling numbers from the air. No one really knows when the 250,000th vehicle will be reached to trigger the phaseout. However, based on Elon's tweet, I am sure he has been crunching some numbers and ensuring that it will utilized most efficiently. His comment about revenue shortfalls to make customers happy shows that he is going to figure this one out.

Even without the credit I am already sold. I started this thread because I just wanted people to know how the tax credits are calculated and my opinion that the Model 3 will have tax credits for plenty. The early reservers and the people who are still reserving today.

 

[Thomas Edison]

It does if you live with your parents.

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.

 

[SmarterMotors]

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.

Good point. Also there is insurance and some maintenance still needed (tires, brakes, check-ups, etc). So you gotta think about the true total cost of the vehicle.

 

[Thomas Edison]

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

Good point. Also there is insurance and some maintenance still needed (tires, brakes, check-ups, etc). So you gotta think about the true total cost of the vehicle.

 

[Jaybert]

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

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...

 

[SmarterMotors]

In 2015 about half of Model S deliveries went to the US. With tesla expanding its international sales network and them getting more and more attention outside the US I strongly believe many more Model 3 will be sold overseas. Europe alone is an important market for cars and its population far exceeds US population.

As soon as tax incentive phaseout begins, it'll make sense to produce a large proportion of Model 3 for US customers during the following 15 to 18 months. I hope they'll deliver a lot of pre-phaseout cars to europe when they are still speeding up production thus postponing the begin of the phaseout so they can produce more cars during the phaseout period. However I think those pre-phaseout production adjustment deliveries will mostly go to canada because it's closer and early deliveries being closer to the factory seems to be Elon's plan.

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

 

[Jaybert]

It does if you live with your parents.

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