I was short on time with that last post. Sorry. I have several CPA's in the family and know the law well. You can only deduct what you owe the the Feds after doing your taxes at the end of the year, to a max of $7500. If you don't owe any taxes or get money back from the Feds for the year you buy your Tesla you can't take any of the 7500 credit.
Here is from an article in US News And World Report, a very well known publication:
"The federal electric car tax credit is only available in the year that you put the car in service, and you can’t carry the credit from year-to-year. It will only pay for any federal tax you owe, so if you are only required to pay $3,000 of federal income tax for the tax year in which you purchased the car, you can only take a $3,000 credit. Any remaining amounts cannot be carried over into future years."
Here is the entire article. The above section is about half way down the article.
https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work
Max, I don't know how much more clear I could be......I was talking about the amount of taxes owed at the end of the year. You know when you file your taxes. Not what you paid over the entire year. I thought I was pretty clear when saying what you owe. I didn't say what you paid in over the year is what it is based on.
OMG This is so simple.......The credit is an up to $7500 amount and is only known after you do your end of the year taxes. So, I will spell it out so you can understand and then will post links to show I obviously know what I am talking about. Besides working for Toyota Motor Company in the legal department that handled the original setup of these plug in rebates I guess you just don't understand.
So, here goes...This may get long. Please feel free to jump to the multiple articles and sources below.
As you work during the year your employer taxes out taxes each pay period (I hope we agree on this unless you are self employed). The amount of taxes taken out of your paycheck each pay period is determined by the tax withholding document you filed when you first got your job, usually part of new hire orientation etc. Although, you can choose to have the taxes withheld by filing a new tax withholding form at any time you choose. At the end of the year, you have paid both state and federal taxes (some states don't have state income taxes). The rate at which you are taxed depends mostly on your income. So, I hope up to this point you agree with what I said.
I will use myself as an example for ease of use. My wife and I bought our Tesla model S, P100D at the end of last year (December 2016). As part of buying the car we paid the following (rounded figures)
$150,000 For The Car
$10,000 Sales Tax
$1,200 Doc Fees From Tesla
$161,200 Total
As part of buying the car we were eligible for up to a $7,500 Federal tax credit.
So, in March of 2017 we sent all of our tax info to the CPA which included items such as W2's that show how much was taken out of our pay over the year. We also sent in documents such as donation documents, medical expenses (medical expenses can only be claimed if they are equal to or greater then 7.5% of your gross earnings). So, after plugging in all the numbers such as:
1) How much we made.
2) How much taxes were taken out based on income/tax bracket.
3) Deductions
4) Federal Tax Credit For The Tesla
5) Additional Income (stocks, bonds etc.)
At this point your/my tax person (or you if you do them yourself) will know if you paid in to much and you are due money back or you didn't pay in enough and you owe additional money to the Federal or State.
So, as I said in using myself as an example. In March I found out we didn't have enough taxes taken out over the year in 2016 and owed the Federal Government about $2,500. This is where the electric vehicle tax credit comes into play. Since we only owed $2,500 to the Federal Government we were only eligible to use that amount of the electric vehicle tax credit. You can only use what you owe to the federal government after doing your taxes at the end of the year up to the max of the credit amount. So, in my case since I owed the feds $2,500 I was only able to use that amount of the car credit. Any unused portion is lost and can NOT be rolled over to the next year. In addition, if you do your taxes and find out you paid in to much in taxes so the Federal Government owes you money back you are not able to use any of the Electric Vehicle $7,500 Credit......That is Right, ZIP, ZERO......ZILCH!!!
The Electric Vehicle Credit Has nothing to do with what you paid in over the tax year. It is only applied to what happens after you do your taxes at the end of the year. If you owe an amount up to $7,500 it will wipe that amount.....The remaining amount of the credit is lost. Again, if you are due money back from the feds because you paid in to much taxes you CAN NOT use any of your credit, it is totally lost.
Remember, This Is A CREDIT, Not A REBATE or REFUND.
So, Now I will Provide You With Multiple Sources/Articles Including Turbo Tax, US World & News Report Etc.
Edmunds:
Electric Vehicle Tax Credits: What You Need to Know | Edmunds
From The Edmunds Article:
How Much Is the Credit?
You'll often hear that a credit is worth "up to" a certain amount. "Up to" is the critical modifier. The federal incentive is usually referred to as a flat $7,500 credit, but it's only worth $7,500 to someone whose tax bill at the end of the year is $7,500 or more. Let's say you buy a
Nissan Leaf or other eligible vehicle and you owe $5,000 in income tax for a particular year. That's all the tax credit will be. Uncle Sam's not writing a refund check for the other $2,500. And an unused portion of the credit can't be applied against the following year's taxes.
If you are leasing the vehicle, the tax credit goes to the manufacturer that's offering the lease, not you. The carmaker will likely factor the credit into the cost of the lease to lower your monthly payment, but it isn't mandatory.
The credits also are based on the electric car's battery size. For some models, the maximum can fall well below $7,500. For example, the
Toyota Prius Prime, a plug-in hybrid hatchback, only qualifies for a $4,502 federal tax credit.
Turbo Tax:
How does the electric car tax work. Will I get a refund if what ... - TurboTax Support
Nerd Wallet:
Tax Credits and Rebates for Plug-In Cars Made Easy - NerdWallet
From The Nerd Wallet Article:
And because the amount is a credit against taxes owed and not a flat rebate, your total federal income tax bill determines the final value.
For example, if you purchase a plug-in electric vehicle with a maximum federal tax credit of $7,500 and your total income tax bill that year is $8,000, you’ll get the full benefit of the $7,500 credit (and owe $500). But if your tax bill is $6,200, you’ll be able to claim only a $6,200 credit. The government won’t send you a check for the remaining $1,300 and you can’t carry it over to the next year.
US World & News Report:
https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work
From The US World & News Report:
The federal electric car tax credit is only available in the year that you put the car in service, and you can’t carry the credit from year-to-year. It will only pay for any federal tax you owe, so if you are only required to pay $3,000 of federal income tax for the tax year in which you purchased the car, you can only take a $3,000 credit. Any remaining amounts cannot be carried over into future years.
EV NETWORK:
Federal EV tax credit explained. Will your Tesla Model 3 qualify?
From The Article:
First, this is a tax credit, not a rebate. This means that you have to owe $7500 in taxes at the end of the year that you buy your car to receive the full amount.
This is not based on how much was withheld from your paycheck throughout the year, but the final amount you actually owe.
To find this out, look at your most recent form 1040. Look at line 47. This is how much you owed. So, for instance, if line 47 says you owe $9,000 for the year, you would qualify for the full $7500. If, however, line 47 says you owe $5,600, then $5,600 is the maximum you will receive back. If you only paid in $5,000 for the year though, that's all you get back. If for some reason you only paid in $1000 for the year, and line 47 says you owe $8,500, you would subtract the $7,500 and that would leave you with a balance owed of $1,000, which you already paid in, meaning you get nothing back, but owe nothing more. Assuming nothing changes in your income or deductions, this would be about the same next year.
So, as I said from the very beginning......The tax credit is an UP TO amount, not that you get $7500 of your taxes. It is simply based on what you owe at the time you file your tax return for the year you bought your car. If you owe $7500 to the feds on taxes you can use the entire amount. If you only owe $3,000 you can only use that amount of the $7500 credit and the rest is tossed out, not able to be used the next year. Lastly, if you are due money back from the Federal Government after doing your year end taxes you lose the entire $7,500 credit. So, as I said before...for Tesla to assume that every customer is going to be able to use the $7500 is crazy. They show it as a deduction in the cost when ordering a car. Like YOU WILL be getting this amount back, shady. They should say Up To $7500 based on your tax situation. If you were going to get the $7500 back for sure it would be a rebate not a credit.
Enough Said. If you don't take multiple reputable articles as proof then you never will. Many people just assume you get the $7500 with the way it is done on Tesla's site.
