With no $7,500 credit, could you still afford to buy?

[Trnsl8r]

Now I read Shark's post again and I guess I should add one more scenario...

Say that you made $10k and the tax rate is 30%. You only owe $3k in taxes. If you apply for the tax credit, you'll only get $3k for it, not $7.5k, because can't get more credit than what you owe in taxes.
Likewise, if you have no income and owe no taxes, then the tax credit won't do you any good at all.

 

[Robert.Boston]

@Trnsl8r: I agree.

Let me try it very straightforwardly:
Get out your 2010 Form 1040. Read Line 60, "total tax". This line would have been reduced by $7,500, but not below zero, had you bought an EV in that year. The entry on line 76, "Amount you owe", which subtracts payments already received, is not relevant.

I'm not a tax professional, and if you have any concerns on this matter, then you should discuss them with one.

 

[shark2k]

Ok. So re-reading what you two said, I think we are on the same page. Basically the only way you will get the full $7,500 is if your total tax is $7,500 or greater. Either way, what I said about not getting money back is correct, right? Because Trnsl8r, you said in the post I quoted of you:

If you paid $7500 worth of taxes in installments throughout the year and on Dec 31 you owe zero, if you apply the tax credit you would get a refund of $7500

Wouldn't that be incorrect? It kind of goes against what you said in your last post.

-Shark2k

 

[Mycroft]

Nope, that's correct. If you pre-paid $7,500 during the year and on Dec 31st, you owe zero, then you originally owed $7,500 and paid it. So if you deduct the EV credit, then you no longer owe the $7,500, so you'll get a refund.

 

[Beavis]

Trnsl8r is right. Total tax before payments or withholding needs to be greater than $7,500 to get the full credit. I won't even get into the credit ordering rules. Consult your tax advisor.

Note for any CO owners...the state credit is refundable up to a maximum of $6,000. So you would get a refund even if your state tax is less than $6,000. Also, it is exempt from sales tax in CO.

 

[masterjrm]

I haven't thought about the way the tax credit would apply until recently. Unfortunately I have been deployed since Nov2011 and will not get back to the states until Nov2012. So I will only have a tax liability for part of November and December which will not even come close to $7,500. I am P564 and have been waiting since Mar 2009 but I might have to push off getting a Model S until next year in order to take advantage of the financial benefits.

 

[Lloyd]

Just an idea, but you can put the car in someone's name that can use the credit. I may put it in my son's name who can use the credit for income necessary for tuition payments. Transfer back to me later is not taxed in California.

 

[NigelM]

Just an idea, but you can put the car in someone's name that can use the credit. I may put it in my son's name who can use the credit for income necessary for tuition payments. Transfer back to me later is not taxed in California.

That sounds like IRS trouble. I'm no expert, but AFAIK if you put the car in your son's name then it's liable to 35% gift tax on the value over $13,000 ($26,000 if you have joint assets with your wife and she concurs); that's potentially a tax bill >$17,000 to give your son the rebate of $7,500. You're better off just paying directly for some/all of your kid's tuition which is a tax-free gift if you pay it directly to his college.

 

[gg_got_a_tesla]

I haven't thought about the way the tax credit would apply until recently. Unfortunately I have been deployed since Nov2011 and will not get back to the states until Nov2012. So I will only have a tax liability for part of November and December which will not even come close to $7,500. I am P564 and have been waiting since Mar 2009 but I might have to push off getting a Model S until next year in order to take advantage of the financial benefits.

Yes, it's unfortunate that the IRS doesn't allow spreading this credit across years (unlike the 30% solar panel/heating credits). A slight delay in delivery (no, no, I don't have a vested interest here ) is probably better than playing with (IRS) fire!

And, thanks much for serving! Stay safe.

 

[spatterso911]

Self-employed individuals that pay quarterly can deduct the amount from quarterly payments and apply the credit so that there is no underpayment penalty. This will allow you to have actual cash in hand, particularly if your quarterly payments are usually substantial.

 

[Lloyd]

If you have a loss carry forward from a previous year, and you have no federal tax liability for the curent year then you loose the credit.

 

[dmckinstry]

Just an idea, but you can put the car in someone's name that can use the credit. I may put it in my son's name who can use the credit for income necessary for tuition payments. Transfer back to me later is not taxed in California.

Hmm. My son is in the Denver area. $6000 credit from CO, and I'm sure his income is high enough (mine isn't right now) to get back all of the $7500 federal credit. He has my name anyway, so it probably wouldn't be much problem transferring the delivery to him. Would he have to keep the CO plates on it for year before I could plate it in WA?

 

[Lloyd]

Check to see if Son to Father transfer is taxed in WA first! Check to see also if Nigel is correct regarding the Gift Tax.

 

[NigelM]

Check to see also if Nigel is correct regarding the Gift Tax.

My tax accountant tells me that is correct. The "Gift Tax" covers material goods such as cars, not just money. BTW, transferring back to you at a later point in time may make your son liable for another chunk of gift tax, depending on how much time has passed and the value of the car at that point.

 

[Lloyd]

I checked also, bottom line is you are right, it is not worth the complications it can create. It created other probems I was told with Estate inheritance later down the road also.

Here are some edited comments from my accountant. (very good BTW)

The state gets all over out of state purchases to avoid sales tax.

Motor homes, boats and airplanes are most common efforts. There are
some very specific rules and it can be avoided but I am not sure if
Sean would get the credit.

It may be tax and income based, not a refundable credit. Is it
refundable or another credit like the charging station. They brag to
give a credit, then manipulate calculation to avoid it. You
need income tax to offset.

Boats and motorhomes need to stay out of the state I think six months.

Not a lot of bragging rights on a Tesla if you can't drive it.

My thought is just buy it.

Depending on which model and options, cost is $75 to $100K.

Because estates can be large and very taxable be careful
Currently, over 4 million is taxed at 55% and is offset (the 4 mil is
reduced for lifetime gifts.) If you pass $75K or so off now as a gift,
that reduces your the tax free amount later. It adds it to your
taxable and tax free calculations later. It will cost you 55% at
present rates later. Not a good swap. Save 7500 now, lose $41250
later.

Worse, ______ estate would be reduced in the future for the same $75K
when he gives the car back to you so the gov might collect the 82,500,
more than the the the car, 55% from each estate.

If the estate tax issue is included, you are likely to end up losing
$82,500 to save $7500.

Take the hit now. Drive the little battery powered rocket an extra
$7500 worth. At the price, that is only a few additional trips round
the block.

I am not sure what school would say about any education breaks if
there was a tesla listed as the student's personal vehicle. Might
cost you more there too. They might not think he needs any tuition
breaks.

Tax minimization is not the goal, income maximization is second.
Personal enjoyment is first.

My tax accountant tells me that is correct. The "Gift Tax" covers material goods such as cars, not just money. BTW, transferring back to you at a later point in time may make your son liable for another chunk of gift tax, depending on how much time has passed and the value of the car at that point.

 

[brianman]

Depending on which model and options, cost is $75 to $100K.

Take the hit now. Drive the little battery powered rocket an extra
$7500 worth. At the price, that is only a few additional trips round
the block.

I like this guy/gal.

 

[Lloyd]

Great guy for taxes and a good friend for 20 years. Saved me lots of $ for many years. I drive (or fly) 600 miles every year for him to do my taxes in San Diego. PM for contact or more info.

I like this guy/gal.

 

[masterjrm]

I will do the onetime deferral when I get the email. I just hope it doesn't push me too far into next year. I hope I can get the car as close to the new year as possible. I really don't want it to go past March because then my total wait will be over 4 years since time of reservation. Well GG, you'll be able to get your car one order sooner now.