Tesla EV Tax Credits coming back?

[nate704]

$10k tax credit bills will be worked/voted on around August/September timeframe, and we should be able to see the results before October when the new FY starts for the government.
I will definitely pay the premium for the 4680 batteries with structural battery pack as well as the front and rear megacasting, which will resolve a lot of issues that we are seeing today.

 

[TravelFree]

31 co-sponsors for S.1298 - Clean Energy for America Act. 1 Independent, rest Democrats: Passed out of Senate Finance Committee on tie party line vote 14-14.

Thanks for the numbers. I suffered through the painful process of reading this and find one key change in the bill that is significant. They got rid of the proposed May 24 date and changed it to:

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall apply to vehicles sold after the date of the enactment of this Act.

While this does not help those who will take delivery before. it at least eliminates the arbitrary May 24th date. I still would prefer it be for the Tax year it is enacted so it doesn't harm Tesla and GM as people cancel their orders waiting for the Bill to become Law.

I am continuing to read through this to see how they handle Union benefits if it remained at all.

 

[sgalla04]

Thanks for the numbers. I suffered through the painful process of reading this and find one key change in the bill that is significant. They got rid of the proposed May 24 date and changed it to:

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall apply to vehicles sold after the date of the enactment of this Act.

While this does not help those who will take delivery before. it at least eliminates the arbitrary May 24th date. I still would prefer it be for the Tax year it is enacted so it doesn't harm Tesla and GM as people cancel their orders waiting for the Bill to become Law.

I am continuing to read through this to see how they handle Union benefits if it remained at all.

My only question, what is most current language? The text on the .gov site that you are referencing (does it get updated in near-real time)? Or the PDF from the committee meeting? I ask because the text only references April 22, 2021 and the committee meeting was on May 26, 2021.

 

[TravelFree]

My only question, what is most current language?

Good question. While I am no authority on this, I believe that once it is written in the form of an actual bill and assigned the number, that's what will be voted on by the Full Senate when Schumer decides to bring it up for the vote. He has that authority. I see the comments made by committee members including the chair to be just their comments and possibly be introduced to the full Senate as an amendment. But currently, I go by the Senate Bill and not the committee's notes we saw earlier.

Also it appears this Bill only addresses the elimination of the original phase-out. The additional $2500 for American made and $2500 for Labor organizers is nowhere to be found in the Bill. The only reference to what comes after Dec 31, 2021 is the plan to make the tax credit modify the 1986 IRS code to be a refundable amount. Consequently, until and if this Bill is amended on the floor of the Senate the discussion of $10,000 and $12500 tax credits is obsolete. We're back to the original $7500 tax credit for Teslas delivered after the date this Bill becomes Law.

The only tax credit extension that is for deliveries after Dec 31, 2020 are 2 and 3 wheeled EV's. 4 wheel EV's are eligible for deliveries after the Bill becomes law.
I'm not happy about that but what can you do?

BTW there is a whole section for EV's used for commercial registration. So if you planned to make your Tesla owned by your business you need to read through that section.


Overall IMO, this is a much better balanced and fair writing than that original PDF that came from the committee. They obviously saw that was DOA if they tried to bring it before the full Senate.

 

[TravelFree]

One comment to clarify your question. Since that original Bill was referred to the Finance committee, the chairs additions need to be taken seriously but until we see the actual wording in the Bill it won't be official. The chair may be getting legal advice as well as political advice on what to add or just forget about to get something passed.

 

[PretecSH]

Currently there are 8 Infrastructure Bills circulating. There might be components of any of these "EV Credit" legislations included for negotiation. So as you might expect, it is nearly impossible unless you are working on The Hill to determine what is being put in or out and which Infrastructure Bill has "legs" for passing.

My thought on this (note, pure speculation, need to discuss with someone on the Hill, and I am not) is that any one of these (or something else) could get added to the larger infrastructure bill, but the one that passed committee (Sen. Wyden's) might have a higher chance of getting picked because at least it's one that made it through committee. Again just speculation but it makes sense to me.

Again, I am very bearish on $7,500+ passing because:

• Won't pass with 10+ R votes, so it won't pass:
  • as a standalone bill, or
  • as a bipartisan infrastructure bill.
• Rs say no tax increases on wealthy, enough Ds say no infrastructure without climate/EV. Seems like $7,500+ is a nonstarter right now.
• Could possibly still get something in reconciliation if Manchin gets on board and bipartisan talks fail. Moderate Ds will need to run for reelection on "compromise"; trimming this credit but still passing something is low-hanging fruit.
• Trimming down the credit (if one gets passed at all) seems more likely.

Only other option I see is maybe they can get a bipartisan infrastructure bill passed now (without using the one reconciliation bill they have left this year), then cram EV and climate through on reconciliation later this year.

Also note, we are unlikely to see anything major in 2022 because it'll be an election year, very little gets done. So I'd think it's this summer/fall or nothing until 2023 (if Ds keep a majority). It'll be sold by Rs as "EV's don't pay for roads maintenance because they don't pay the gas tax. So they now pay a new fee."

Note that if Rs take over all branches in 2024, expect to see taxes/fees on EVs, and possibly ending the credit. (Many states already have EV taxes and fees, and more R states are adding them each year.) This would piss me off but would not surprise me.

 

[nate704]

My thought on this (note, pure speculation, need to discuss with someone on the Hill, and I am not) is that any one of these (or something else) could get added to the larger infrastructure bill, but the one that passed committee (Sen. Wyden's) might have a higher chance of getting picked because at least it's one that made it through committee. Again just speculation but it makes sense to me.

Again, I am very bearish on $7,500+ passing because:

• Won't pass with 10+ R votes, so it won't pass:
  • as a standalone bill, or
  • as a bipartisan infrastructure bill.
• Rs say no tax increases on wealthy, enough Ds say no infrastructure without climate/EV. Seems like $7,500+ is a nonstarter right now.
• Could possibly still get something in reconciliation if Manchin gets on board and bipartisan talks fail. Moderate Ds will need to run for reelection on "compromise"; trimming this credit but still passing something is low-hanging fruit.
• Trimming down the credit (if one gets passed at all) seems more likely.

Only other option I see is maybe they can get a bipartisan infrastructure bill passed now (without using the one reconciliation bill they have left this year), then cram EV and climate through on reconciliation later this year.

Also note, we are unlikely to see anything major in 2022 because it'll be an election year, very little gets done. So I'd think it's this summer/fall or nothing until 2023 (if Ds keep a majority). It'll be sold by Rs as "EV's don't pay for roads maintenance because they don't pay the gas tax. So they now pay a new fee."

Note that if Rs take over all branches in 2024, expect to see taxes/fees on EVs, and possibly ending the credit. (Many states already have EV taxes and fees, and more R states are adding them each year.) This would piss me off but would not surprise me.

There are many RINOs that will vote "yes" and the $10k bill (for Tesla vehicles) will pass.

 

[TravelFree]

(Many states already have EV taxes and fees, and more R states are adding them each year.) This would piss me off but would not surprise me.

I would only be pissed off if the EV road tax is not equivalent to what the gas cars pay, per mile of road travel.

In Florida the Federal tax is 18,4 cents per gallon.. Florida adds 26.5 cents and local governments can add 12 cents = 56.9 cents per gallon. total

Taking an average of 30mpg for a typical gas car that would be about 1.9 cents per mile maximum for for a road tax in Florida. Is 30mpg average normal?

If you drive your EV 12,000 miles per year, that would amount to $228 a year for road tax.

The problem with this is how to bill it when some of your driving is out of state. The only fair way would be to meter all EV's on the KWH of energy and bill at the charger. Home charging would also have to be metered.

 

[TravelFree]

Here is the official position of our local government on the road tax for EV's:

What about electric vehicle owners?​

Plug-in vehicles are a growing share of the automobile market and those car owners obviously do not pay any gas taxes. Some studies have looked at moving toward a system where motorists are charged taxes based on actual miles driven, which would pick up electric-powered vehicles. In Jacksonville, electricity still comes with sales tax and franchise fee that consumers pay, so even through they don't get charged for fuel at the pump, they still are contributing to government coffers when they plug in for battery charging.

 

[Schulz1983]

Someone correct me if I’m wrong:
If you receive a refund every year from the IRS then you can’t claim an EV tax credit anyway? Correct? if you owe $2500 in taxes and claim a $7500 EV tax credit the most you would get on that credit is $2500? So, in order to claim a $7500-$10000 EV credit would be to owe the IRS $7500-$10000? I receive a refund every year so the EV tax credit would do me no good from the way I understand it. We bought in February as I didn’t see any point on holding out for a tax credit that may never come. So far I’ve saved $3500 from Model Y price increases. Not to mention the price of fuel as I was driving a vehicle that managed a whopping 16 MPG.

 

[sgalla04]

Someone correct me if I’m wrong:
If you receive a refund every year from the IRS then you can’t claim an EV tax credit anyway? Correct? if you owe $2500 in taxes and claim a $7500 EV tax credit the most you would get on that credit is $2500? So, in order to claim a $7500-$10000 EV credit would be to owe the IRS $7500-$10000? I receive a refund every year so the EV tax credit would do me no good from the way I understand it. We bought in February as I didn’t see any point on holding out for a tax credit that may never come. So far I’ve saved $3500 from Model Y price increases. Not to mention the price of fuel as I was driving a vehicle that managed a whopping 16 MPG.

Receiving a refund does not factor at all into being eligible for a tax credit. Current law is a $7,500 (less for some PHEVs) NON-refundable credit except for GM and Tesla. Potential future law will make this a fully refundable credit.

Non-Refundable, you must have federal tax liability. Example: You paid $30,000 in federal taxes, you owed $20,000. You will receive a tax refund for $10,000. If you bought a qualified EV, you'll get the credit and total refund will be $17,500. If you paid $30,000 and owed only $1,000, then you'll get a tax refund of $29,000, but with a qualified EV, you only have $1,000 more in liability (what you actually owe) to take the non-refundable credit against. Therefore total refund would be $30,000 or the total you had paid since you didn't owe anything in the end with your liability plus the credit.

Fully Refundable = you get it no matter how much you owe in taxes.

I hope this makes sense. It comes up a lot. Tax refund checks are just a result of paying too much throughout the year. Nothing wrong with that, but that's what it is.

 

[TravelFree]

Tax refund checks are just a result of paying too much throughout the year. Nothing wrong with that, but that's what it is.

Actually you should never overpay your taxes during the year. It's best to underpay just a little and then pay the difference before April 15th. If you underpay by too much there could be penalties.

If there is concern that you don't owe enough in Federal taxes to use all the $7500 Tax credit ( or higher depending on what is passed) there is an easy way to fix that. This is not advice so don't start in on me about giving free advice. Let's just say this is what I did. Most people have a 401K or a traditional IRA. You can calculate the amount in that retirement plan which is tax deferred and roll it over into a self directed Roth IRA to the amount that would generate $7500 of taxable income. Then when you file your taxes the taxes owed on the Roth roll over is wiped out with the EV credit. There are other ways too but this one is the easiest. Actually you can roll over a calculated amount each year into your Roth IRA to wipe out your entire taxes each year until your 401K is all rolled over. The younger you are them more opportunity you have to build tax free wealth this way.

You'll have to do the math and time it right so you don't screw yourself. If that is too much then get a good tax accountant to help you. The cool thing now is you not only got your EV tax credit, but you protected a huge chunk of your money tax free from ever paying taxes on it AND it's growth ever again. How big it will grow depends on how you invested it.

 

[k.alexander]

My thought on this (note, pure speculation, need to discuss with someone on the Hill, and I am not) is that any one of these (or something else) could get added to the larger infrastructure bill, but the one that passed committee (Sen. Wyden's) might have a higher chance of getting picked because at least it's one that made it through committee. Again just speculation but it makes sense to me.

Again, I am very bearish on $7,500+ passing because:

• Won't pass with 10+ R votes, so it won't pass:
  • as a standalone bill, or
  • as a bipartisan infrastructure bill.
• Rs say no tax increases on wealthy, enough Ds say no infrastructure without climate/EV. Seems like $7,500+ is a nonstarter right now.
• Could possibly still get something in reconciliation if Manchin gets on board and bipartisan talks fail. Moderate Ds will need to run for reelection on "compromise"; trimming this credit but still passing something is low-hanging fruit.
• Trimming down the credit (if one gets passed at all) seems more likely.

Only other option I see is maybe they can get a bipartisan infrastructure bill passed now (without using the one reconciliation bill they have left this year), then cram EV and climate through on reconciliation later this year.

Also note, we are unlikely to see anything major in 2022 because it'll be an election year, very little gets done. So I'd think it's this summer/fall or nothing until 2023 (if Ds keep a majority). It'll be sold by Rs as "EV's don't pay for roads maintenance because they don't pay the gas tax. So they now pay a new fee."

Note that if Rs take over all branches in 2024, expect to see taxes/fees on EVs, and possibly ending the credit. (Many states already have EV taxes and fees, and more R states are adding them each year.) This would piss me off but would not surprise me.

I agree with a lot of this analysis (again I a not on a hill so like you this is just speculation).
In my opinion, the best chance for an EV Tax Credit to be passed is if it is included in the infrastructure bill which as I understand will likely only get passed through reconciliation -- someone who understands this better, please correct me on this oversimplification.
I think there's a small chance of getting enough Rs to vote for the infrastructure bill, let alone a stand-alone EV Tax Credit bill.
Lastly, also agree that's either this summer/fall or not for a long time to come.

 

[sgalla04]

Actually you should never overpay your taxes during the year. It's best to underpay just a little and then pay the difference before April 15th. If you underpay by too much there could be penalties.

If there is concern that you don't owe enough in Federal taxes to use all the $7500 Tax credit ( or higher depending on what is passed) there is an easy way to fix that. This is not advice so don't start in on me about giving free advice. Let's just say this is what I did. Most people have a 401K or a traditional IRA. You can calculate the amount in that retirement plan which is tax deferred and roll it over into a self directed Roth IRA to the amount that would generate $7500 of taxable income. Then when you file your taxes the taxes owed on the Roth roll over is wiped out with the EV credit. There are other ways too but this one is the easiest. Actually you can roll over a calculated amount each year into your Roth IRA to wipe out your entire taxes each year until your 401K is all rolled over. The younger you are them more opportunity you have to build tax free wealth this way.

You'll have to do the math and time it right so you don't screw yourself. If that is too much then get a good tax accountant to help you. The cool thing now is you not only got your EV tax credit, but you protected a huge chunk of your money tax free from ever paying taxes on it AND it's growth ever again. How big it will grow depends on how you invested it.

All good points. You "should" never overpay, but some people like knowing they are getting a refund. I on the other hand I don't like giving the gov't an interest free loan. I'd rather owe a few thousand and gain interest myself on the money. My accountant makes sure I pay enough throughout the year to avoid the underpayment penalty. Never want to owe that much.

 

[PatrickTM]

All good points. You "should" never overpay, but some people like knowing they are getting a refund. I on the other hand I don't like giving the gov't an interest free loan. I'd rather owe a few thousand and gain interest myself on the money. My accountant makes sure I pay enough throughout the year to avoid the underpayment penalty. Never want to owe that much.

Agreed: from an interest, TVM, and opportunity cost perspective, best to owe as close to $0 as possible at tax filing.

Just got to be careful not to owe too much though. For most people, owing more than $1k will generate a penalty, but I think the first year's a freebie.

Topic no. 306, Penalty for underpayment of estimated tax | Internal Revenue Service

Topic No. 306, Penalty for Underpayment of Estimated Tax

www.irs.gov

 

[TravelFree]

Just got to be careful not to owe too much though. For most people, owing more than $1k will generate a penalty, but I think the first year's a freebie.

That's correct. I believe if you pay up before Jan 20th you will be OK. Don't rely on that as it is not advice. I owed a couple thousand and did the electronic transfer before that date and never got a penalty. Some years back I waited until April to file and pay a similar amount and had to pay the penalty. Then they got me to file quarterly for several years. I've been through one general 3 year audit and came out great. These days It's gotten so complicated, I use Turbotax and download my investing from the bank. So much easier to do what if options.

 

[vijayk]

Hello folks - after following multiple threads on this topic, I am thinking of postponing my MYLR delivery to September (ordered in May; Delivery before Jun 30 and VIN not assigned). My current vehicle lease is getting over by end of June and I would need to rent a car from Avis for the next 3 months if I'm doing this. I want to share my rationale and understand if I'm missing out something - so thanks in advance for the suggestions

-> Ordered a Blue MYLR at $52K and I am looking to get this with a loan through a credit union; With a $5K down payment, monthly payment would come around $700 or so
->If I rent a car through Avis, it comes to around $700/month and if any of the multiple proposals become a law by September, then I am looking at getting say $5000 at $2100 spend

1. So rationally speaking, I should look to rent for the next 3 months and get the vehicle in September with a cool $5000 refund since there's no cash flow impact to me per se. And If I don't consider the pleasure derived by driving the car for 3 additional months, does this logic still hold true? or I am I missing something?

2. Also - if the law doesn't pass till September and gets pushed to say October or something and if the next delivery is in December (and Tesla doesn't jack up the price for my order), I would be looking at still a $3000 savings - so it would make sense to not get a Tesla till some version of the law passes? Thoughts?

 

[Schulz1983]

Hello folks - after following multiple threads on this topic, I am thinking of postponing my MYLR delivery to September (ordered in May; Delivery before Jun 30 and VIN not assigned). My current vehicle lease is getting over by end of June and I would need to rent a car from Avis for the next 3 months if I'm doing this. I want to share my rationale and understand if I'm missing out something - so thanks in advance for the suggestions

-> Ordered a Blue MYLR at $52K and I am looking to get this with a loan through a credit union; With a $5K down payment, monthly payment would come around $700 or so
->If I rent a car through Avis, it comes to around $700/month and if any of the multiple proposals become a law by September, then I am looking at getting say $5000 at $2100 spend

1. So rationally speaking, I should look to rent for the next 3 months and get the vehicle in September with a cool $5000 refund since there's no cash flow impact to me per se. And If I don't consider the pleasure derived by driving the car for 3 additional months, does this logic still hold true? or I am I missing something?

2. Also - if the law doesn't pass till September and gets pushed to say October or something and if the next delivery is in December (and Tesla doesn't jack up the price for my order), I would be looking at still a $3000 savings - so it would make sense to not get a Tesla till some version of the law passes? Thoughts?

What if the law doesn’t pass?

 

[OB1Kenobi]

What if the law doesn’t pass?

Exactly this. There's no reason to think that passage of these expanded credits is a done deal. In fact, the Republicans have proposed to add a federal tax surcharge for EV owners, a tax that Biden has flat out rejected. Honestly, you should be making a purchasing decision based on the current economics. Do you have the money for a down payment? Can you afford the resulting monthly payment if you finance the remaining balance? If the answer is yes then why delay based on what could possibly happen later, when there is no guarantee it will? If they change the law and you suddenly get $7500 in tax credits, hey, bonus! Remember, they are non-refundable tax credits, so you would need to have at least $7500 in 2021 tax liabilities in order to get all $7500 credited back. Also, using the $7500 to make a lump payment on your loan reduces the principal, so you get paid off earlier, but doesn't change the monthly payment.

 

[vijayk]

Exactly this. There's no reason to think that passage of these expanded credits is a done deal. In fact, the Republicans have proposed to add a federal tax surcharge for EV owners, a tax that Biden has flat out rejected. Honestly, you should be making a purchasing decision based on the current economics. Do you have the money for a down payment? Can you afford the resulting monthly payment if you finance the remaining balance? If the answer is yes then why delay based on what could possibly happen later, when there is no guarantee it will? If they change the law and you suddenly get $7500 in tax credits, hey, bonus! Remember, they are non-refundable tax credits, so you would need to have at least $7500 in 2021 tax liabilities in order to get all $7500 credited back. Also, using the $7500 to make a lump payment on your loan reduces the principal, so you get paid off earlier, but doesn't change the monthly payment.

That's a very valid scenario...then I would be losing $2000 I would have paid on renting the car...With the upshot being $7500 pay out I am thinking of taking the gamble...Just wondering if the situation is as simple as this or am I not thinking through...

Also - I wouldn't want to pay down the loan if I can get it financed at <2% and if the inflation for the next couple of years stays above it (and I can invest it 'wisely')...