Tax Credit question

[Jrogville]

In order to qualify to take the tax credit, do you have to still own the car at the end of the tax year? Also, is there a requirement for how long you must own the car? Thinking about buying a Model 3 and transferring it to my daughter. I'm early enough in the reservations (March 31 prior to the event) that I think the credit may still be available.

 

[SageBrush]

Will you have to pay sales tax twice ?

 

[Cricket88]

Not if he "gifts" it

 

[Cricket88]

To answer the OP, as long as you're the first registered owner on record, you can sell/transfer anytime afterwards and still qualify for it since you purchased it that tax year

 

[SageBrush]

Not if he "gifts" it

I thought gifts were limited to $10k a year

 

[gearchruncher]

The following requirements must be met to qualify for the credit.

• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
• You placed the vehicle in service during your tax year.
• The vehicle is manufactured primarily for use on public streets, roads, and highways.
• The original use of the vehicle began with you.
• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States

So, careful. If you acquired the car knowing you would give it to someone else, it appears you are ineligible.

 

[gearchruncher]

I thought gifts were limited to $10k a year

One individual may give another individual $14,000 per year in the USA with zero consequences.

If you want to give more than that to one person in a year, you are subject to a lifetime limit of $5.45M. After that, some taxes come into play.

These taxes are what some politicians like to call "Death Taxes". Seriously. They only come into play if you give away more than $5M in your life ($10.9M if you're married). All that fuss over "having to pay the government when you die" only applies to people that die with more than $5M in the bank.

However, in general, the USA does not limit gifts between people in any way, and the receiver is not subject to tax.

 

[HankLloydRight]

Some states allow you to "sell" the car to an immediate family member sales tax-free or for $1.

 

[Jrogville]

Some states allow you to "sell" the car to an immediate family member sales tax-free or for $1.

I thought about that and looked on my state's DMV site. Couldn't find anything about it in exemptions. Florida treasures their sales taxes a lot. But I'll ask a person, just in case.

 

[Jashev]

I thought gifts were limited to $10k a year

I have transferred numerous cars to family members without any sales tax implications. Sales taxes are determined by the states, the $10k limit you are referring to is cash transfers for federal tax purposes.

 

[gearchruncher]

the $10k limit you are referring to is cash transfers for federal tax purposes.

$10K in cash is a Federal reporting law in order to discourage money laundering and the use of drug money. Nothing to do with tax. All businesses must report all cash transactions above $10K, and it's illegal to break up transactions to avoid this. You have to do this even to deposit $10K cash in your own bank account.

$14K is the limit of a gift of property where it has no federal tax effects. Above this, it eats into your $5M lifetime exemption, and only after you give $5M does tax come into play.

 

[drklain]

+1.

I don't think Florida imposes a sales tax on private auto sales anyway. Virginia doesn't either. I think the sales tax on a private transaction is a California thing....but then again, a LOT of taxes are just California things....

 

[HankLloydRight]

Oh, I think it's the other way around. Most states levy a sales tax on all auto sales, private and dealer. Including VA. It's a huge source of tax revenue for the states.

Virginia: Virginia Department of Motor Vehicles

Calculating the SUT Tax
For a transaction between private individuals, the minimum Motor Vehicle Sales and Use Tax is calculated based on the trade-in value given in the NADA Official Used Car Guide. You must present either an Affidavit for Procurement of Title (SUT-1A) if the vehicle is 5 years old or newer (based on the model year) or a Bill of Sale if the vehicle is more than 5 years old. (The sale price placed on a title certificate by the seller is the equivalent of a bill of sale.) A bill of sale must be signed by both the seller and the buyer to include the full vehicle description, vehicle identification number and date of sale.

 

[drklain]

Thanks for the correction. I don't remember paying it when I made a private purchase years ago, but that may just be rose-colored glasses....or the purchase price was so low that it just wasn't noticeable.

 

[Jashev]

$14K is the limit of a gift of property where it has no federal tax effects

I'm just showing my age. It used to be $10k ;-)

 

[Jashev]

I know that it varies from state to state, however I have transferred vehicles to family members in NY, NJ and PA and there was never a sales tax issue. In fact, just transferred a $25k car to my daughter a few months ago.

 

[Jrogville]

+1.

I don't think Florida imposes a sales tax on private auto sales anyway. Virginia doesn't either. I think the sales tax on a private transaction is a California thing....but then again, a LOT of taxes are just California things....

They do. They collect it form the buyer when you go to the tag office to transfer the title. Like I said, Florida loves those sales taxes (only fair, I guess, we don't pay any state income tax).

 

[Jashev]

They do. They collect it form the buyer when you go to the tag office to transfer the title. Like I said, Florida loves those sales taxes (only fair, I guess, we don't pay any state income tax).

Don't you have an asset tax in Florida?

 

[Jrogville]

Don't you have an asset tax in Florida?

Almost all of it was repealed in 2007. The only part they kept was a one-time tax on real estate transactions and an annual tax on the value of leases of government property by non-government entities. But I don't even play an accountant on TV.

 

[alloverx]

FYI, Yes in WA (also no income tax) you can transfer/gift to a family member and not pay sales tax. I have done this twice with the same car. This was a 8 year old car when first done.