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Tax Credit

Discussion in 'Model 3' started by Future3Driver, Mar 26, 2016.

  1. Future3Driver

    Future3Driver Member

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    Does anyone know how the tax credit works? Does Tesla give you a certificate as a means of proof to keep in the event you get audited? Do they simply take the amount off your purchase agreement when you take delivery?
     
  2. aronth5

    aronth5 Long Time Follower

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    #2 aronth5, Mar 26, 2016
    Last edited: Mar 26, 2016
  3. neroden

    neroden Happy Model S Owner

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    You put the VIN on the form on your tax return; that's how the IRS can check that you really bought the car if they decide to audit you.
     
  4. nd4spd569

    nd4spd569 Member

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    Not 100% but about 90% sure. It's a non refundable tax credit. So you need a tax liability to actually take advantage of it (most Americans have a tax refund so you wouldn't). The tax credit will only off set any tax liability (taxes owed) that you have. And since it's the non refundable kind it won't generate a refund. So say your tax bill was $10000, after the credit you owe $2500. If your tax bill was $5000, you owe $0. However the tax credit isn't allowed to be carried forward so next year you won't have that $2500 leftover in credit. It's just gone. And a way the government for sure saves money when people don't realize this.
     
  5. Az_Rael

    Az_Rael Active Member

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    #5 Az_Rael, Mar 27, 2016
    Last edited: Mar 27, 2016
    Close. It actually has nothing at all to do with your refund from the IRS. It does have everything to do with your taxes owed. But that number is independent of your withholdings (which determine if you get a refund or not based on if you sent too much $$ to the IRS or not). So, if you owe $15000 in taxes normally, and your withholdings are set such that you actually sent the IRS $16000 over the year (meaning you normally get a $1000 refund), if you took the EV credit this same year, your taxes owed woul be reduced from $15000 to $7500. You still paid the IRS $16000 over the course of the year (assuming you didn't change your W4 withholdings), so instead of getting back just $1000, you would get back $8500.

    The EV tax credit is not "refundable" in the sense that if you only owe $5000 in taxes, then you only get credit for $5000 of the $7500. There are some tax credits that are refundable, and no matter how much you owe the IRS, they pay you the full amount.


    To do a quick check for your own tax liability, you can look at line 47 on your 1040 from 2015. Then, add up any other credits you get (up to line 54) and the $7500 EV credit and subtract the credits from the number on line 47. If the result is less than zero, you aren't fully able to use the EV tax credit.
     
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  6. rnelsonee

    rnelsonee Member

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    Tesla is hands off with the tax credit - they won't give you a certificate, and certainly won't take money off at the bill of sale, because they don't know how much of that credit you'll qualify for.

    So you pay the full price, and then when you file your taxes you subtract up to $7500 from your tax (but you can only subtract up to your tax liability). Then you can subtract out any withholding already paid, and you get your refund. If you get audited, the IRS will go by VIN/delivery date.
     
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  7. Red Sage

    Red Sage The Cybernetic Samurai

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    NOTE: What follows is my reply to someone elsewhere. My apologies if it seems rather harsh. I was trying to be as matter-of-fact as possible.

    The details of the Tax Credit are outlined at the EPA's website:
    Federal Tax Credits for All-Electric and Plug-in Hybrid Vehicles

    It is illustrated in this chart:
    [​IMG]

    It is specified in documents at the IRS website:
    Plug-In Electric Drive Vehicle Credit (IRC 30D)

    Elon Musk, CEO of Tesla Motors, has been very direct in saying that no one should count on this Tax Credit being available for use with Model ☰. Not you. Not me. Not anyone else. It may go away for political reasons. It may simply expire due to sales of Model S and Model X. In either case, receiving the Tax Credit, as a full $7,500 amount, is NOT guaranteed in any way, shape, or form.
     
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  8. timk225

    timk225 Member

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    Elon is a multibillionaire, he could just GIVE us each $7500 for buying a Model 3. Just take it off the purchase price, or give us $7500 worth of free options.

    $7500 per car times 200,000 Model 3's equals $1,500,000,000. 1.5 billion. Pocket change for him.
     
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  9. Red Sage

    Red Sage The Cybernetic Samurai

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    timk225: The term 'paper billionaire' applies, I believe. I doubt that Elon Musk has a checking account somewhere with $11,000,000,000+ sitting in it. He probably has a Personal Assistant, that person is given a Tesla/SpaceX/Solar City credit card, and the card is never declined. So, Elon gets to take a private jet, have a limo pick him up and drop him off, stay in nice hotels, and if he remembers to, he gets some pretty nice meals. Elon owns stock and majority positions in companies that are worth billions at today's market value. Should the stock market drop by a ridiculous amount, those stock holdings might not be worth the paper they are written on to anyone. Surely there are trust funds set aside for his kids, and a contingency plan that will allow him to live out the rest of his days in relative comfort if 'The WORST' happens to financial markets, unless Elon owns billions in gold, silver, oil, or real estate, he is actually 'only' a millionaire when it comes to liquid cash, if that.
     
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  10. CyberKnife

    CyberKnife Member

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    Couple questions:
    1. How does IRS know when if someone's EV delivery was before the 200k delivered vehicle so the person filing tax gets 7500$ credit?

    2. If I took delivery of two model 3s before 200k mark, would I get $15k in tax credit? I like to reserve a model 3 for relative who won't be able to stand in line early 3/31, and in case tesla doesn't allow transferring one of my reservations.
     
  11. tga

    tga Active Member

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    See IRS form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. You have to enter the date the EV was placed in service; they go by the in-service date vs the phase out schedule after 200,000 cars are sold (US deliveries only).

    Yes, if you keep the car for yourself. In fact, the form has has space to declare 2 EV's. However, if your plan is to buy for your relative and re-sell to them, you can't take the tax credit - purchases for resale are ineligible.
     
  12. Red Sage

    Red Sage The Cybernetic Samurai

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    The IRS is informed by Tesla Motors of the eligible VINs that are built each month/quarter.

    30D. New Qualified Plug-in Electric Drive Motor Vehicles - Tesla Motors Inc.

    As long as both vehicles were built no later than during the six month period that the 200,000th eligible vehicle was manufactured, they will each qualify for consideration of the full $7,500 Tax Credit -- but you must maintain possession of them after Delivery.

    [​IMG]
     
  13. ummgood

    ummgood Member

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    How long do you legally have to remain owner of the car before you can sell it? I have every intention of buying a Model 3 and keeping it but if something happens or I really dislike the car I might sell it. Is there some kind of information on what the IRS wants you to do so they know you didn't just buy it for resale purposes?
     
  14. rnelsonee

    rnelsonee Member

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    #14 rnelsonee, Mar 28, 2016
    Last edited: Mar 28, 2016
    The guidelines in the bulletin here don't say - they just s say the uses of the vehicle must commence with the owner and it can't be for resale. Barring some other instructions (Form 8936 Instructions (PDF) say the same thing), just having it for one day may meet the requirement.

    This is speculation, but I'd imagine the resale restriction is just there in case someone doesn't have enough tax liability to make full use of the credit, and this prevents them from having friends or family buy the car for them, which is lost revenue (I'd bet one of the selling points to get this thing approved in Congress was that not everyone is going to use the full $7500, otherwise they would have made it refundable and it would cost the Treasury $1.5B for each manufacturer, and that doesn't include the phaseout).

    If you have a reasonable reason to sell the car shortly after buying it, and especially if it's an arms-length sale (selling to a stranger at a fair price) I wouldn't expect any issues with the IRS at all.
     
  15. zambono

    zambono Member

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    If you are purchasing a 3 don't expect to see the tax credit.
     
  16. gregincal

    gregincal Active Member

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    I would say if you sell the Model S soon after buying it you could very well be audited and have to defend that you didn't buy it intending to resell.
     
  17. JonathanDandrea

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    I keep reading how the Model 3 will be negatively affected by the tax rebate phase out but Chevy is in the same boat with the Bolt. They are eating into the rebate with the Volt and are advertising the Bolt with an after rebate price. I think consumers will be more upset with the cost of a car going up $7500 than the loss of a potential tax break.
     
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  18. model3fan

    model3fan Member

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    I wrote it up here too with the help of some great posts here on TMC

    www.teslamodel3fan.com/incentives
     
  19. EcoHeliGuy

    EcoHeliGuy Member

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    I truely don't understand how anyone's math works out that the $7500 would even be close to available. If the Model 3 is on time, 100,000-175000 Model S/X will have been built. Tesla still sells a large majority of produced cars to the US market. If Model 3 production doesn't start until a quarter later your chances at the 50 percent might be nil aswell.


    Irony of the whole thing was this all indicates that the Tax Credit was a huge success. Not only did it produce an atmosphere for mass produced EV's. It also created the First new auto Manufacture in the US in decades and 50,000+ jobs.

    I'm biased being a Canadian without a $7500 federal tax credit.
     
  20. dgpcolorado

    dgpcolorado Member

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    I think it is simpler than that. The tax credit was "sold" as allowing a taxpayer to keep some of what she/he would otherwise owe in tax payments. This way only those who actually owe taxes get the credit so it isn't "welfare". This point of view is widely held in some political circles and helped make the tax credit more politically palatable.

    GM plans such low production numbers for the Bolt that it may get the tax credit for some time to come, depending on how Volt sales shake out (and they haven't been all that great in recent years). It is a very different situation from Tesla's attempt to produce a mass market car.
     

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