ccutrer
Active Member
Yup, seems right to me. And seems like a big risk to take changing your deductions in 2017 with very little guarantee you'll get the car this year.
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Tax Credit Clarification
- Thread starter SmarterMotors
- Start date
If $40K for a car is stretching your budget, you may not owe enough federal tax to take full advantage of the credit. You want to look at your tax return and look at the line that says how much tax you owe (not what was withheld). Maybe you have a lot of debts and you do have an income high enough that you're paying over $7500 a year in federal taxes.
cpa
Active Member
From the information that you provide, I think you are slightly optimistic. For 2016, MFJ with $29,500 of taxable income results in your income tax to be $3,501. Your example shows "total tax" of ~$4,000, and you state that you perform "1099 IT work" on the side. This suggests to me that you file a Schedule C to report your income or loss from business or profession. Accordingly, you must pay SE tax on your net profit if your profit >$400 for the year. I therefore conclude that your self-employment tax hit is approximately $500, which equates to a profit roughly around $3,500 for the year.
Total tax per your tax return will not necessarily equal your income tax, and if indeed you do pay some SE tax, the EV credit is not allowed to offset "other taxes" reported on form 1040.
So, if my assumptions are correct, had you purchased a Tesla in 2016, you would have received the credit to offset your income tax of ~$3,501, wiping that out. Then your withholding from your day job would be credited against your assumed $500 of SE tax.
$5,000 taxes withheld less your $500 SE tax would result in a refund of $4,500.
To summarize, the EV credit only offsets income tax. It does not offset any other taxes that are calculated separately. You can use your actual numbers to get a more accurate picture.
cpa
Active Member
The income taxes that are calculated on your CG and dividends can be reduced by the EV credit. That income is included on page 1 of your 1040, and therefore is used for taxable income after personal deductions from Schedule A and your personal exemptions.
However, there is also the Net Investment Income Tax that is figured separately on form 8960 that applies to selected taxpayers who have modified AGI >200/250K. CG and dividends are considered investment income. This NIIT is one of those "other taxes" that is calculated in addition to income tax; accordingly your BEV credit cannot be used to reduce that additional tax.
As far as AMT, this is not obvious. The credit is allowed to reduce AMT if the credit is a personal credit. A personal credit is one that the taxpayer takes on a non-business asset. However, if the BEV purchased is used in the taxpayer's trade or business, then the AMT limitation comes into play.
Easy stuff.
JBare
Member
I say stretching my budget because I hate debt and other than my upcoming house purchase I have nothing else in regards to liabilities. Other than the 2015 Wrangler I purchased 3 years ago (also ordered and waited 6 weeks for) I have always purchased a 2 year or < 40K mile car/ truck closer to the $20K budget.
I can relate. I was only able to afford my Model S because I'm allergic to debt. I've never had any except my mortgage and that's small and I drove a 1992 Buick I bought new until last year. When I started looking at cars, my budget was around $30K, but I was willing to go as high as $40K.
The year before I bought my Model S, my taxes owed was right in the $7500 ballpark after deductions, etc. @cpa clarified it for me, but I also got a hefty sales tax deduction last year because of the car purchase. That's gong to vary state to state, but I deduct sales tax paid in Washington because we don't have state income tax. The big sales tax deduction along with everything else pushed my taxable income down a fair bit and I ended up owing a lot less than $7500. It's nice to not owe any federal income tax, but for those of us who don't have larger 7 digit (at least $150K a year) or more than 7 digit incomes, getting the whole $7500 might not be possible.
Taxes, especially in the US, are very complex and two people making the same income can have wildly different tax situations. Each person needs to look at their own tax situation, but unless you're income varies wildly, you can look at your past taxes and get an idea how they will change the year you get your EV. Because we get taxed in some many ways, what we owe in federal taxes is mostly hidden unless you know what to look for. Most people making less than the median income (around $50K) pay more in state, local, social security and Medicare taxes than they do federal income taxes.
When you're getting a regular paycheck from an employer, what you see every week or every other week is a big blob taken out of your pay and it seems like you're getting hit with a lot of taxes. A lot of us are, but unless you're making a pretty good sized income, the actual income tax part of that is really fairly small.
For most of you looking to get a Model 3, the point where the phase out goes from $3750 to $1875 is the point where it might actually affect your taxes. Anyone who isn't rich who cancels their Model 3 reservation because the incentive has gone from $7500 to $3750 is probably making a major mistake because the change wouldn't have affected them or would only have a minimal impact on their taxes.
you are a hard person to get a poker playing read on.
you say you have 2 model 3 reservations and will get a "cheap ' $35k - $45K pair of vehicles for your children ($90k!)
you say you have a model X
you use a favorite super bear /short phrase "kool-aide"
you write like both a super bear and a strong long tesla owner?
"neither fish nor flesh nor good red hen"
"on the internet, no one knows you are a dog"
what exactly are you please? You are a short term member here with not a lot of posts.
you seem skeptical, like someone from montana, but less erudite
just curious
T34ME
Active Member
I emailed Tesla customer service today for information about the Income Tax credit. Here is what I found out, take it for what it's worth.
15 minutes ago, I wrote a simple email to Tesla customer service and asked them when they expect to reach the 200,000 threshold. I also wanted to see how responsive Tesla customer service would be because I have heard some complaints about them on the Internet. I wrote this email at 5pm on a Friday afternoon so I figured everybody would be gone or on their second margarita and didn't expect a response until late next week or perhaps never. Within 5 minutes after hitting send, my phone rings!
"Hi el crucero, this is Dylan from Tesla. I see you have a question for us"
(Me) AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAGH! UHHHHHH. UHHHHHH. OOOOOOOOOOOOOOOOOOHHHH!
(him) what was that sorry I didn't catch that
(me) UHHH UHHHH.......... I can't talk, I can't think!
(him) okay just take your time
(we went on to have a 5 minute conversation about the 200,000 threshold and these are the key points)
- The Government considers a car sold when title is signed over at delivery
- Tesla expects to reach the 200,000 threshold "early in deliveries"
- Tesla can't say when "early in deliveries" is at this time, too many variables and they are still playing with the numbers
- Since I am a 3/31/2016 reservationist in California I will definitely get the full tax credit if I take one of the early cars.
- Tesla is committed to keep reservationists publicly and personally informed as they have a better understanding of how the deliveries will occur so that everyone can plan for the threshold and the phase out of the tax credit.
- Tesla is going to drag out deliveries if the 200,000 threshold might occur near the end of a quarter to carry over into the first couple of weeks in the new quarter so that more people can take advantage of the tax credit for a longer period of time.
- the staff at Tesla is just as excited as the reservationists are, maybe even more so, because they will be getting their cars soon and they have seen the car and it is unbelievable. Morale is high and the staff feel they are delivering something that is going to change the world.
- I told Dylan that many reservationists, like moi, were likely to delay our order in order to get the cars with the options we want. The right car was more important than the tax credit. He said, Tesla is well aware of this scenario and have taken that into consideration. He said I will get the car with the options I want and most likely qualify for at least a partial tax credit. (WOW!)
We ended the call with well wishes for a happy weekend. La Crucera had heard me exclaiming from the other room and she rushed in to see if I was okay, and then listened to the conversation on the speaker phone. After the call ended, she asked me, "who was that, Elon"
15 minutes ago, I wrote a simple email to Tesla customer service and asked them when they expect to reach the 200,000 threshold. I also wanted to see how responsive Tesla customer service would be because I have heard some complaints about them on the Internet. I wrote this email at 5pm on a Friday afternoon so I figured everybody would be gone or on their second margarita and didn't expect a response until late next week or perhaps never. Within 5 minutes after hitting send, my phone rings!
"Hi el crucero, this is Dylan from Tesla. I see you have a question for us"
(Me) AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAGH! UHHHHHH. UHHHHHH. OOOOOOOOOOOOOOOOOOHHHH!
(him) what was that sorry I didn't catch that
(me) UHHH UHHHH.......... I can't talk, I can't think!
(him) okay just take your time
(we went on to have a 5 minute conversation about the 200,000 threshold and these are the key points)
- The Government considers a car sold when title is signed over at delivery
- Tesla expects to reach the 200,000 threshold "early in deliveries"
- Tesla can't say when "early in deliveries" is at this time, too many variables and they are still playing with the numbers
- Since I am a 3/31/2016 reservationist in California I will definitely get the full tax credit if I take one of the early cars.
- Tesla is committed to keep reservationists publicly and personally informed as they have a better understanding of how the deliveries will occur so that everyone can plan for the threshold and the phase out of the tax credit.
- Tesla is going to drag out deliveries if the 200,000 threshold might occur near the end of a quarter to carry over into the first couple of weeks in the new quarter so that more people can take advantage of the tax credit for a longer period of time.
- the staff at Tesla is just as excited as the reservationists are, maybe even more so, because they will be getting their cars soon and they have seen the car and it is unbelievable. Morale is high and the staff feel they are delivering something that is going to change the world.
- I told Dylan that many reservationists, like moi, were likely to delay our order in order to get the cars with the options we want. The right car was more important than the tax credit. He said, Tesla is well aware of this scenario and have taken that into consideration. He said I will get the car with the options I want and most likely qualify for at least a partial tax credit. (WOW!)
We ended the call with well wishes for a happy weekend. La Crucera had heard me exclaiming from the other room and she rushed in to see if I was okay, and then listened to the conversation on the speaker phone. After the call ended, she asked me, "who was that, Elon"
Im not aware of the attributes of Montanans, What am I? I'm a realistic car lover. Is it so strange to speak about the pros AND cons of Tesla cars? I know on this forum more respect is shown when more praise is heaped on Tesla but I have a hard time just blindly praising. You don't have to love every facet of a car to own one or two if you enjoy your cars as I do. I love many things about my X but I understand ever car has negatives and I can acknowledge them. I love the exclusivity of my X with the speed performance of a supercar yet it can be driven daily. The doors turn heads everywhere but they will be an achilles heal no doubt over time. I believe Tesla was either foolish putting Falcon Wing doors on the X or they were greedy knowing that the doors would sell more cars but they will eventually be a expensive nightmare for the second or third owner after the warranty period. I'm amazed by the electric drive for its speed and range and the different feel it has from my other high end ICE cars (I also have an i3 Rex and I thought it felt fast, but now not so much). I dislike the overall quality of the car in so far as subpar fit and finish, and the low quality of materials (the leather isn't very durable)(poorly designed door and window seals and gaskets often fail before new delivery). I feel that upper S and X Teslas are way overpriced for what you get in comparison to other luxury cars, but I still purchased the X and I am seriously looking at new inventory S P90's and P100's. I'm was just being realistic when I referred to the effect of the federal and state tax incentives on the sales of electric cars and what the lack of these incentives will do to sales of a $35k car. I reserved two model 3's because I reserved in the first few minutes and if the tax credits apply it is a no brainer decision, you can't loose too much money over a three year period and they will replace two of my children's 3 series BMW's that are going out of warranty. To be able to buy two model 3's for substantially less than a well equipped X and enjoy a total $15,000 tax credit does make them seem cheap in comparison. I'm not bashing Tesla but rather just acknowledging the pros and the cons.
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thank you. i have a better read. i am a ~70 year old with a large wad of TSLA stock and run across a lot of " bitter shorts"
I too am not quite thrilled with the falcon wings complexity, but "it is what it is" I too have a 3/31/2016 res and am not quite "flush" enough, being retired and "no paycheck" to get anything other than a model 3 or a CPO, and being retired, dont need a large volume vehicle.
There are certain trigger words and phrases shorts use and i'm used to "poseurs" pretending to "damn with faint/moderate/large praise" depending upon how far underwater they are, whom have posted elsewhere and here, tho not as much here, some are "bots, passing in the night"
If I offended you, I apologize profusiously.
peace
Apologies if this has been answered already -- I looked but didn't find the explicit answer.
Is the tax credit applied to one's taxes before or after the income withheld is?
In other words, is scenario A or B correct assuming the phaseout has not begun?
A) Applied before withheld
Total Tax of $7,500 (Line 39 of 1040A)
Total income withheld $8,500 (Line 40/46)
Total refund $8,500
B) Applied after withheld therefore using $0 of credit
Total Tax of $7,500 (Line 39 of 1040A)
Total income withheld $8,500 (Line 40/46)
Total refund $1,000
Is the tax credit applied to one's taxes before or after the income withheld is?
In other words, is scenario A or B correct assuming the phaseout has not begun?
A) Applied before withheld
Total Tax of $7,500 (Line 39 of 1040A)
Total income withheld $8,500 (Line 40/46)
Total refund $8,500
B) Applied after withheld therefore using $0 of credit
Total Tax of $7,500 (Line 39 of 1040A)
Total income withheld $8,500 (Line 40/46)
Total refund $1,000
It is a non-refundable tax credit. So it directly reduces your tax owed. (In other words scenario A.)
Dynastar
Member
As far as Tesla wanting to end the tax credit, I think we need to be a little careful here. If you go back and listen to the earnings calls when Elon talks about this, he is specifically talking about the "Zero Emissions Vehicle Credits" from CARB states.
When other car companies sell an EV they get these credits that can be applied against their sales of gas guzzlers. Tesla does not have any gas guzzlers to sell, so they have to sell the credits to other companies for "pennies on the dollar" according to Elon. So traditional car companies get the full value of the credit and Tesla gets a fraction. If the credits were ended Tesla's position would improve because other companies would no longer get a larger financial benefit from selling EVs.
I don't think Tesla is too worried about the federal tax credit because they are well aware it doesn't scale. They plan to sell 100s of thousands of cars a year in the near future, the federal tax credit can only take them so far. It's just a little reward for early reservation holders.
When other car companies sell an EV they get these credits that can be applied against their sales of gas guzzlers. Tesla does not have any gas guzzlers to sell, so they have to sell the credits to other companies for "pennies on the dollar" according to Elon. So traditional car companies get the full value of the credit and Tesla gets a fraction. If the credits were ended Tesla's position would improve because other companies would no longer get a larger financial benefit from selling EVs.
I don't think Tesla is too worried about the federal tax credit because they are well aware it doesn't scale. They plan to sell 100s of thousands of cars a year in the near future, the federal tax credit can only take them so far. It's just a little reward for early reservation holders.
question for the thread: is the CA incentive running out?
CVRP Funding Status
I'm not an expert in tax stuff but I did read that 500mil meant for the program was shelved?
CVRP Funding Status
I'm not an expert in tax stuff but I did read that 500mil meant for the program was shelved?
MiamiNole
Member
Stretching your budget for a $40K and not making enough to owe federal tax are not one and the same. Regardless of how much money you make, if your money is obligated for whatever reasons (mortgage, kids in college, other debts, etc.) buying a $40K car could very well be a stretch. It doesn't mean you don't make enough to owe $7500 in federal tax. Someone with a $1M salary still could possibly have to "stretch" for a $40K car if their budget is already taken up by other things. I am building a new house this year, so technically I will have to stretch my budget to get everything I want in my Model 3. Has no bearing on how much I pay in taxes...
internauts
Member
Using Elon's numbers for 2nd Qtr Model 3: 30, 100 and 1500, and most current Model S and X deliveries, is it possible that Tesla Motors will hit the 200,000th electric vehicle delivery before September 30?
I have a first day reservation, but want a dual, so I expect delivery in 2nd Qtr 2018. I get 100% of the tax credit in 2nd Qtr 2018 if the 200,000th car occurs after September 30, but only 50% of the credit if that number is before September 30. So, whoever is tracking this issue obsessively, thanks for posting that opinion.
I have a first day reservation, but want a dual, so I expect delivery in 2nd Qtr 2018. I get 100% of the tax credit in 2nd Qtr 2018 if the 200,000th car occurs after September 30, but only 50% of the credit if that number is before September 30. So, whoever is tracking this issue obsessively, thanks for posting that opinion.
First, please remember that they are only doing about 12,500/quarter in the US. If they delivered 20k M3's in December I think they would hit. I expect those to be delivered in January.
Second, if they hit 200k on October 1st then Q2 2018 would only get half. I personally expect it to be hit in Q1 2018. I am sure InsideEVs will give a good breakdown of it when the numbers come out.
I agree with your assessment. If they hit Elon's most recent schedule for the Model 3 and Model S/X deliveries remain about the same, I would expect Tesla to hit the 200K mark in early Q1 2018. If things go very well, I can see them approaching 200K U.S. deliveries in December 2017. In that case they would ship more S and X models overseas in Q4 2017 and possibly delay some Model 3 deliveries until Q1 2018 in order to maximize the number of full tax credits available to Tesla buyers.
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