7500 EV tax credit update with new bill

[gunick06]

I do not have anything near the $150K income. Yay, I qualify. So I pulled money out of an investment account to pay for my AGT. I even pre-paid my Federal tax liability like a good patriot. Was happy to pay cash for my new vehicle. Then it hit me later that night. My $170K that I took out will be looked at as income. Oops, I really screwed up. I am not an accountant but fairly certain that I lost my $7500 tax credit. Should have taken out a loan at 5%, received my $7500 tax credit and then paid the vehicle off. Don’t I feel stupid now.

The income requirements do go into effect until Jan 1, 2023. At the same time, the limits on the purchase price of the car also go in, and there will be absolutely no Lucids that are within the limits.

I’m confused by your post.

 

[noobzilla]

I do not have anything near the $150K income. Yay, I qualify. So I pulled money out of an investment account to pay for my AGT. I even pre-paid my Federal tax liability like a good patriot. Was happy to pay cash for my new vehicle. Then it hit me later that night. The $170K that I took out for the purchase will be considered income. Oops, I really screwed up. I am not an accountant but fairly certain that I lost my $7500 tax credit. Should have taken out a loan at 5%, received my $7500 tax credit and then paid the vehicle off. Don’t I feel stupid now.

Only the capital gains will count as taxable income so if you paid $50k and cashed out $75k, that's a gain of $25k

 

[Babyrocko1908]

In many states, if it's an agreement for goods or services valued at more than $500, it requires a signed agreement.

Correct. Under the Uniform Commercial Code, contracts for the purchase or sale of goods over $500 must be in writing to satisfy the Statute of Frauds. Unfortunately a "hand shake" wouldn't suffice here.

 

[Mawashi Geri]

The income requirements do go into effect until Jan 1, 2023. At the same time, the limits on the purchase price of the car also go in, and there will be absolutely no Lucids that are within the limits.

I’m confused by your post.

Sorry, that was my attempt of being light hearted and cynical. I was just stating:

1. I am not an accountant
2. Should of taken out a loan for the purchase
3. I should of paid off the loan the following tax year after qualifying for the tax credit
3. That my monies that I removed from the taxable account would be viewed as income
4. That I am not an account….see 1

Sorry about the post. Thought I was being lite hearted about my purchase. Tax laws can be complex to the untrained. I qualify as an untrained. I know that I am not the only one confused by the $7.5k tax credit. I am not sure about the capital gains until the 2022 1099 arrives. Fairly certain that with my pension and the withdrawal for the purchase I no longer qualify for the x<$150K income requirement. Still have my AGT though.

 

[digiboxer]

Thanks for taking the time to write this, especially on the holiday (eve)! I think I get the points about no particular delivery date being required, and about liquidated damages clauses having to apply to both parties in a contract.

If I understand correctly, you interpret a particular sentence from the IRS website [1] to group clauses as follows, indicated by colors and parentheses:

"For example, if a customer has made a (non-refundable deposit) or (down payment of 5 percent of the total contract price), it is an indication of a binding contract."

As opposed to:

"For example, if a customer has made a (non-refundable deposit or down payment) of (5 percent of the total contract price), it is an indication of a binding contract."

However, a couple sentences earlier:

"...if a customer has made a significant non-refundable deposit or down payment..."

Which to me favors the latter reading...though I am not even close to a lawyer. I can see why the "majority" opinion is what it is. I do hope you're right though. Thanks again for clarifying.

[1] https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

"Idiot", your handle is the ultimate non sequitur.....

 

[noobzilla]

Sorry, that was my attempt of being light hearted and cynical. I was just stating:

1. I am not an accountant
2. Should of taken out a loan for the purchase
3. I should of paid off the loan the following tax year after qualifying for the tax credit
3. That my monies that I removed from the taxable account would be viewed as income
4. That I am not an account….see 1

Sorry about the post. Thought I was being lite hearted about my purchase. Tax laws can be complex to the untrained. I qualify as an untrained. I know that I am not the only one confused by the $7.5k tax credit. I am not sure about the capital gains until the 2022 1099 arrives. Fairly certain that with my pension and the withdrawal for the purchase I no longer qualify for the x<$150K income requirement. Still have my AGT though.

You can typically check cost basis and realized gains from your investment account. Run a report or statement

 

[Air_GT]

Depends. A lot of wealthy people have almost no income, from a tax perspective. And believe me, they take every tax credit they can get away with.

True, but when you have a 10 million net worth and are taking 0$ salary, is 7500$ really gonna affect your decision to buy a car? If you really want/like the car you’re gonna buy it.

The category of people you just described are EVEN MORE able to afford a 150k$ car than the working couple with 750k$ household income.

 

[joec]

True, but when you have a 10 million net worth and are taking 0$ salary, is 7500$ really gonna affect your decision to buy a car? If you really want/like the car you’re gonna buy it.

The category of people you just described are EVEN MORE able to afford a 150k$ car than the working couple with 750k$ household income.

Yes, but many of these folks are as rich as they are because they take every tax break they can get their hands on. Of course the money makes no difference to them, but it's all in the game of giving the government as little as possible. They pay good money to accountants to find every loophole. And this is one of them. And yes, some will choose a different car just to "win" at paying a bit less tax.

To be clear, this is not me. I live in the only county in Colorado that just voted to not lower our state taxes next year. (Because a flat 2.5% is already pretty ridiculously low.)

But the fact of the matter is, there are billionaires who will qualify for an EV tax credit next year, so long as they buy the correct EV. While folks making $350k a year are out of luck.

Neither needs the incentive. But everyone who can get their hands on it will take it.

 

[idiot900]

Neither needs the incentive. But everyone who can get their hands on it will take it.

As someone fortunate enough to be able to afford this car, I don't really need the $7500 either. I am glad to pay my fair share in taxes. But I feel I already do (and vote 99% of the time for politicans who won't lower my own tax bill). Why volunteer more?

 

[idiot900]

"Idiot", your handle is the ultimate non sequitur.....

Thanks, it's a long-running inside joke, and perhaps truer than I'd prefer

 

[pjdcorp]

Correct. Under the Uniform Commercial Code, contracts for the purchase or sale of goods over $500 must be in writing to satisfy the Statute of Frauds. Unfortunately a "hand shake" wouldn't suffice here.

Are you a lawyer too?

 

[noobzilla]

Also perhaps some of those people got rich because they like to save money when they can whether it comes to not throwing away money just because theyre rich or finding ways to get credits, avoid taxes, or getting deals and discounts. It's habit. It's a good habit to have.

I have massive pet peeve when people say rich people can afford to lose or throw away money. Sure they can financially tolerate it more, but that mentality is disease. "Rich" is relative. There's always someone poorer and imagine if all those poorer people tell you that you dont need to save money and you can lose stuff because youre rich anyway.

If people want and are finding ways to benefit from the 7500 credit regardless of their economic status, good for them and let them be. If people are canceling because they won't be able to get the 7500, just respect their finances. No need to be telling them that they shouldnt be looking at Lucid in the first place or that they can afford to not receive it.

 

[stevelitchfieldpark]

Also perhaps some of those people got rich because they like to save money when they can whether it comes to not throwing away money just because theyre rich or finding ways to get credits, avoid taxes, or getting deals and discounts. It's habit. It's a good habit to have.

I have massive pet peeve when people say rich people can afford to lose or throw away money. Sure they can financially tolerate it more, but that mentality is disease. "Rich" is relative. There's always someone poorer and imagine if all those poorer people tell you that you dont need to save money and you can lose stuff because youre rich anyway.

If people want and are finding ways to benefit from the 7500 credit regardless of their economic status, good for them and let them be. If people are canceling because they won't be able to get the 7500, just respect their finances. No need to be telling them that they shouldnt be looking at Lucid in the first place or that they can afford to not receive it.

Yeah right - don't want to hurt anyone's feelings!

 

[idiot900]

Yeah right - don't want to hurt anyone's feelings!

I do think if $7500 is truly the deciding factor, it's hard to believe that the excess money that would go into this (probably rapidly depreciating) car wouldn't be better deployed elsewhere. But this is a car forum, not a personal finance forum, it's difficult to communicate with nuance by typing, and we don't want to shame anyone.

 

[Keithmaj]

"Idiot", your handle is the ultimate non sequitur.....

Does that imply there are 899 of us also out there?

 

[noobzilla]

Yeah right - don't want to hurt anyone's feelings!

For me it's more so respect than feelings. Respect people and their possessions regardless of wealth.

 

[noobzilla]

Does that imply there are 899 of us also out there?

Nah, definitely more. He's just the 900th

 

[digiboxer]

I do think if $7500 is truly the deciding factor, it's hard to believe that the excess money that would go into this (probably rapidly depreciating) car wouldn't be better deployed elsewhere. But this is a car forum, not a personal finance forum, it's difficult to communicate with nuance by typing, and we don't want to shame anyone.

For me the analysis is multi-faceted, and very subjective.

When I reserved last March the Porsche I intend to sell had a KBB value in the mid-$80. The combined Fed/ State tax breaks were worth about $12K. If I financed the gap (loan or lease) rates were in the 2%s. If I paid cash, I was giving up a money-market return of <1%). I was told I'd have my Touring in late 3rd or early 4th Q.

Fast forward to YE '22. The used car mania has dried up and since I won't see my AT until (likely) next March, I'll suffer considerable addition depreciation on the Porsche. I will lose the $7.5K Fed tax break. Lease and loan rates have tripled. If I write a check, I'm giving up a risk-free 4+% return in MM fund.

The first scenario looked like a no-brainer---what it will look line next Feb-March will likely be much less attractive. So, can I "afford" it? Yeah...but there's a point (and this is the subjective part) where it just doesn't FEEL right....

(BTW, the foregoing obviously ignores the plusses and minuses of the car itself, which are not the point of this discussion)

 

[idiot900]

In your case the $7500 doesn’t seem truly the deciding factor, and nor is the forgone interest money. But I agree there would be a point for me too where it doesn’t feel right.

 

[ikonos]

Is there a text of the income limits to receive the credit? I would like to take a look at that.