Tax credit question

[Vinoth]

I am not qualified to get the tax credit due to the cap. Is it possible to get the car on my relatives name (like father in law) and then get the tax credit from them as a gift.
Also what are the implication of insurance if this can be achieved. I see $7.5k is good amount to take the following options. Let me know your thoughts.

I am thinking of two options:
1. Get it under their name and have loan in their name and I pay it for both loan and insurance for me and my wife.
2. After the tax credit gift is done from my relative, they will sell it to me and I take the ownership from there and also switch the loan to my name.
3. Is this too much of a hassle and don't get tax credit.

I am concern mainly about insurance, will insurance allow it and what about legality of this process.

 

[fholbert]

I am not qualified to get the tax credit due to the cap. Is it possible to get the car on my relatives name (like father in law) and then get the tax credit from them as a gift.
Also what are the implication of insurance if this can be achieved. I see $7.5k is good amount to take the following options. Let me know your thoughts.

I am thinking of two options:
1. Get it under their name and have loan in their name and I pay it for both loan and insurance for me and my wife.
2. After the tax credit gift is done from my relative, they will sell it to me and I take the ownership from there and also switch the loan to my name.
3. Is this too much of a hassle and don't get tax credit.

I am concern mainly about insurance, will insurance allow it and what about legality of this process.

Really?

 

[Bigriver]

Obviously your relatives could buy a car, claim the tax credit that they presumably qualify for. The tax credit is theirs. As owners of the car, they need to have insurance. Insurance should cover whoever they choose to lend the car to.

Then they can later sell it to you (presumably at a reduced price that accounts for tax credit they got) but I believe in most states that would cause sales tax (for the second time) on the value of the car. Right there would probably negate any benefit of the federal tax credit. If they gift it to you, different states treat that differently on whether sales tax is due. But it would then trigger needing to file federal gift tax forms because it is over the $17k exclusion. And I think it is generally dishonest, because your relative isn’t truly gifting it to you. I have never heard of someone being able to assume someone else’s car loan. I assume you would need to separately finance it, and used car rates are typically higher than new car rates.

I vote #3, not worth the hassle.

 

[ATPMSD]

I notice you are in Atlanta. In Georgia you must pay the TAVT, which is 7%, every time the car is titled. On a first sale it is based on what you pay the dealer, on subsequence sales it is based on what Georgia says the car is worth.

Vehicles passed between immediate family members — spouses, parents, children, siblings, grandparents or grandchildren — will pay a reduced fee of 0.5 percent of the car’s worth to title the vehicle, provided the full one-time title ad valorem tax already has been paid.

Here is a link to “gifting” a car:

Georgia Title Transfer

Georgia Title Transfer Guide How to Transfer a Car Title In Georgia Whether you are buying a car in Georgia from the pre-owned lot downtown or from your neighbor's teenager, you will need to transfer

www.etags.com

Here is a link to the gift tax:

Gift Tax Limit 2024: How Much Money Can You Gift? | SmartAsset

You only pay the gift tax if you exceed the lifetime exclusion, and that only happens if you exceed the annual exclusion. Here's how it works.

smartasset.com

Please be sure you personally confirm the about items with the Georgia DMV and your tax accountant.

 

[njmurvin]

Maybe consider leasing?

According to an NPR article …

“In late December, the IRS clarified that vehicles that are leased to consumers can be eligible for a version of the tax credit that is much, much easier to qualify for. It has no requirement that vehicles be made in America, no price cap for vehicles, and no income caps. So if you want to lease a Kia EV6 from Korea, or a six-figure luxury sedan? Go to town.

The credit goes to the company leasing the vehicle out — not the person driving it — and companies aren't required to pass the savings on to consumers. But the tax credit has worked like this for years now, and companies typically have passed along the discount.”

If you choose to go down this road, verify the above in the context of current tax rules and make sure you work with a bank or leasing company that passes along the tax credit (presumably in the form of a reduced cap cost).

 

[Vinoth]

I notice you are in Atlanta. In Georgia you must pay the TAVT, which is 7%, every time the car is titled. On a first sale it is based on what you pay the dealer, on subsequence sales it is based on what Georgia says the car is worth.

Vehicles passed between immediate family members — spouses, parents, children, siblings, grandparents or grandchildren — will pay a reduced fee of 0.5 percent of the car’s worth to title the vehicle, provided the full one-time title ad valorem tax already has been paid.

Here is a link to “gifting” a car:

Georgia Title Transfer

Georgia Title Transfer Guide How to Transfer a Car Title In Georgia Whether you are buying a car in Georgia from the pre-owned lot downtown or from your neighbor's teenager, you will need to transfer

www.etags.com

Here is a link to the gift tax:

Gift Tax Limit 2024: How Much Money Can You Gift? | SmartAsset

You only pay the gift tax if you exceed the lifetime exclusion, and that only happens if you exceed the annual exclusion. Here's how it works.

smartasset.com

Please be sure you personally confirm the about items with the Georgia DMV and your tax accountant.

Thanks. You spoke like an accountant but in this case this will negate the 7.5k tax credit because in the website it states that I have to still pay the ad valorem tax but if they say gift / sales price as 0 does that mean I do not have to pay Ad Valorem as sale price is 0 but again
The gift tax limit is another issue if I exceed $17k then my relative has to pay federal tax correct? so net net 7.5k benefit is negated so why go with this route then?

 

[ATPMSD]

Thanks. You spoke like an accountant but in this case this will negate the 7.5k tax credit because in the website it states that I have to still pay the ad valorem tax but if they say gift / sales price as 0 does that mean I do not have to pay Ad Valorem as sale price is 0 but again
The gift tax limit is another issue if I exceed $17k then my relative has to pay federal tax correct? so net net 7.5k benefit is negated so why go with this route then?

You should read what I wrote and the links more carefully. But I don’t think your Father-in-law will qualify as a “family member” for the 0.5% TAVT on a transfer to you, so that probably kills the idea.

 

[fholbert]

I am not qualified to get the tax credit due to the cap. Is it possible to get the car on my relatives name (like father in law) and then get the tax credit from them as a gift.
Also what are the implication of insurance if this can be achieved. I see $7.5k is good amount to take the following options. Let me know your thoughts.

I am thinking of two options:
1. Get it under their name and have loan in their name and I pay it for both loan and insurance for me and my wife.
2. After the tax credit gift is done from my relative, they will sell it to me and I take the ownership from there and also switch the loan to my name.
3. Is this too much of a hassle and don't get tax credit.

I am concern mainly about insurance, will insurance allow it and what about legality of this process.

Seem like making a tax fraud case against you would be easy, you‘ve published your plan on the internet.

 

[Vinoth]

Seem like making a tax fraud case against you would be easy, you‘ve published your plan on the internet.

My goal is not to do that instead see the possibility to get the tax credit.

 

[E90alex]

Maybe consider leasing?

According to an NPR article …

“In late December, the IRS clarified that vehicles that are leased to consumers can be eligible for a version of the tax credit that is much, much easier to qualify for. It has no requirement that vehicles be made in America, no price cap for vehicles, and no income caps. So if you want to lease a Kia EV6 from Korea, or a six-figure luxury sedan? Go to town.

The credit goes to the company leasing the vehicle out — not the person driving it — and companies aren't required to pass the savings on to consumers. But the tax credit has worked like this for years now, and companies typically have passed along the discount.”

If you choose to go down this road, verify the above in the context of current tax rules and make sure you work with a bank or leasing company that passes along the tax credit (presumably in the form of a reduced cap cost).

Tesla does not pass forward the credit to the customer.

 

[hsfrank]

it is out and out fraud. Besides an IRS investigation which would cause additional taxes and penalty (although remote) you risk insurance fraud, which is less remote, and would deny you coverage in the event of any accident or claim.

 

[mikez10288]

I am not qualified to get the tax credit due to the cap. Is it possible to get the car on my relatives name (like father in law) and then get the tax credit from them as a gift.
Also what are the implication of insurance if this can be achieved. I see $7.5k is good amount to take the following options. Let me know your thoughts.

I am thinking of two options:
1. Get it under their name and have loan in their name and I pay it for both loan and insurance for me and my wife.
2. After the tax credit gift is done from my relative, they will sell it to me and I take the ownership from there and also switch the loan to my name.
3. Is this too much of a hassle and don't get tax credit.

I am concern mainly about insurance, will insurance allow it and what about legality of this process.

Let's openly discuss federal tax fraud...

 

[ATPMSD]

Let's openly discuss federal tax fraud...

Here is the gotcha that makes it fraud:

To qualify, you must:

• Buy it for your own use, not for resale