Fluffhead
Member
Let's be real, someone over the income limit is not considering the cheaper EV.
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Tesla EV Tax Credits coming back?
- Thread starter hnguy054
- Start date
leaftoy
Member
I don't think not have the credit will affect buy/not buy decision on an EV for a family with AGI over $540k. They may not like being excluded and grumble a bit (or a lot). Constantly being excluded from every tax incentive for "making too much" might even affect their future voting. But at that income level they will buy what they want to buy. $8k is not moving the needle one way or the other.
In a family if those let's say two incomes are different, you could very well file taxes separately and the 2nd person (under the cap which I believe is <250k) could claim the rebate.
So let's say you make 300k you are excluded, but if your spouse makes less than 250k, that person could claim this benefit if you file taxes separately understand.
Someone correct me if I am wrong
Hypothetically speaking, sure. Not a tax professional but there are significant advantages to filing separately that for most people mean the $7500-8k deduction for a Tesla is not going to provide an overall lower tax burden unless you have some unusual deductions and one spouse is at a very low income level.
You are probably wrong, but we won't know for sure until we get a signed bill.
Current tax law makes it difficult for a couple filing joint to instead file as married filing separate in order to avoid just what you described (where one spouse makes most of the money and the lower paid spouse files separate and claims all the credits). When you file married filing separate, you lose the ability to take several tax credits including:
Earned income credit.
Child dependent care credit.
Most education credits including the American Opportunity Credit.
Most of those are refundable credits, and my guess is any refundable EV credit would also be included in that list. If the new 2022 EV credit were kept as nonrefundable (it's not now), then a couple filing as married filing separate could probably still take the credit since it's limited to taxes owed, and the lower paid spouse may owe little or no income tax (as separate) and couldn't claim the full credit anyway.
Let's see how that goes.
It doesn't need to be most of the money, it could be a slight difference. Just to put an example, imagine a couple , spouse1 making $300k, spouse2 making $240k. That makes the couple ineligible since they make over $500k, but instead if they filed separately spouse2 would be eligible, perhaps some of these tax brakes would not be applicable, maybe the EV tax credit would be, I guess we will see how that ends.
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Good idea, but that wouldn't work either.
In current tax law, and in the latest text of the Build Back Better Act (Nov 3rd), the maximum income limit for credits (if there is one) is one half if you file married filing separate compared to married filing joint.
In the BBB Act, that max income for the EV credit for married filing joint is $500K. $1 above that, there is no EV credit. Married filing separate has a max income of $250K, same as for a single filer. The tax brackets for married filing separate are also the same as for a single filer.
The IRS and tax legislators have already figured out how to prevent a lot of those tax schemes, not that they have fixed all of them. I suppose they might overlook this in this new, very rushed legislation. I doubt they will, but if they did miss it I think it would get "fixed" later on.
Edited to add:
Just for fun, if you were filing as married filing joint and have high income (>$500K), there is something you could do so long as one spouse makes less than $250K.
All you need to do is get a divorce and then each file as single. In that case, the person making <$250K could get the EV tax credit.
The IRS goes by your marriage status as of Dec 31st. So if you want to claim the credit in 2020, you need to finalize your divorce by 12/31/21. You must remain divorced until at least 1/1/23 in order to get the credit. After that, get married again if you wish.
There is still a problem with this idea. The person making over $250K will have to file as single too and that means most of the tax brackets get triggered at 1/2 the income compared to a married couple, so that person will have to pay higher income taxes compared to when they were married. However, if the income is very high, the tax brackets get closer and the tax difference won't be as bad.
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Hopefully the credit doesn’t get cut out, but hopefully tweeting specifically about EVs is a good sign
I was just reading the PDF. So that means if the married couple jointly makes $500,001, they are out the game correct? Regardless of how they file taxes.
I would rather make $500k a year than claiming the EV tax credit.
Probably not worth it. If you have a high earning spouse filing married and joint has the effect of lowering the top tax rate on the higher spouse.
Let’s say you have someone making $400k and the spouse making $100k. If they file joint their total tax (pre any deductions and exemptions) is $124,088.
If they tried to file separately to get the credit their total tax liability would be $134,282, so they’d be paying $10k extra in taxes to get an $8k credit.
leaftoy
Member
Not quite. There is a phase out which was discussed earlier in this thread. But it phases out quite quickly. I believe around $540k for Tesla and $562k for union shops. I could be slightly off on those numbers.
See End of quarter delivery disruption coming up?
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Yes, you are correct about the phase out. I forgot that part. The phase out in the last version of the bill is $200 of tax credit lost for each $1000 of income above the max of $500K if filing joint or $250K if filing single or married filing separate.
The income they are talking about is a modified adjusted gross income which best I can tell is your adjusted gross income plus any tax free foreign income.
Here is another link to the latest (Nov 3rd) version of the bill. The EV credit part begins on page 1480. You need to pass the bill to find out what's in it.
BBB Act
There must be a lot of $500k earners on this forum to keep talking about that aspect of the bill. I'm more interested in news on passage of the bill and any changes relating to mere mortals (car pricing cutoff, effective date, etc). I thought they advertised they wanted a vote by 11/15? Whatever happened there?
edit: I read the CBO report is due Friday 11/19, and it's expected that it will reveal the spending will not be fully paid for. Biden is already asking congress to ignore the forthcoming CBO report. We'll have to see how the moderates react.
edit: I read the CBO report is due Friday 11/19, and it's expected that it will reveal the spending will not be fully paid for. Biden is already asking congress to ignore the forthcoming CBO report. We'll have to see how the moderates react.
I've been watching here for updates:
CBO Scores the Build Back Better Act
The Congressional Budget Office (CBO) has released cost estimates for every title of the House-passed Build Back Better Act (H.R. 5376). Without interactions, the agency finds the Build Back Better Act would add nearly $160 billion to the deficit over ten years, including nearly $750 billion...
They've been releasing data over the past few days, the final tranche expected Friday.
One other thing no news piece or I have seen on Twitter is the EV 30% home charging credit is extended until 2031!
Also latest update on BBB vote it is potentially happening today in the House. It won't pass Senate until right before Christmas. So we might as well just enjoy the holidays and come back then 
It looks like a House vote is likely to happen by end of week. The big questions are around the Senate modifications and timing to push it through again.
Pelosi: Vote on spending bill 'hopefully will take place this afternoon'
Pelosi: Vote on spending bill 'hopefully will take place this afternoon'
So looks like no huge surprises so far.I've been watching here for updates:
CBO Scores the Build Back Better Act
The Congressional Budget Office (CBO) has released cost estimates for every title of the House-passed Build Back Better Act (H.R. 5376). Without interactions, the agency finds the Build Back Better Act would add nearly $160 billion to the deficit over ten years, including nearly $750 billion...www.crfb.org
They've been releasing data over the past few days, the final tranche expected Friday.
I've been watching here for updates:
CBO Scores the Build Back Better Act
The Congressional Budget Office (CBO) has released cost estimates for every title of the House-passed Build Back Better Act (H.R. 5376). Without interactions, the agency finds the Build Back Better Act would add nearly $160 billion to the deficit over ten years, including nearly $750 billion...
They've been releasing data over the past few days, the final tranche expected Friday.
Thanks for the link! Am I reading it right that out of $1.199B analyzed so far, $1.164B (97% of it) will add to the deficit? That is not very encouraging for finding moderate support, especially since this has been touted as "paid for" with tax changes. :/
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