Federal Tax Credit?

[Tesla2.0]

Your answer lies here.

How to Calculate the Federal Tax Credit for Electric Cars | GreenCars

How much you can get from the Federal Tax Credit depends on the size of an electric car's battery pack. With that in mind, here’s our quick guide to understanding the rules on the Federal Tax Credit for EVs and other regional EV incentives you should know about.

greencars.com

 

[Ksa23]

For a filing that has Federal Income tax:

I always thought it was as simple as.. does your Federal Income tax liability on your tax return equal at least $7500? If so, your liability is reduced by $7500, but no less than $0. If you paid any amount over your newly calculated tax liability, and you receive a refund for any amount paid over your new liability.

Example: Bob paid $10,000 in Federal Income tax and claimed a $7500 EV credit. His new liability is $2500, and he receives a refund of $7500.

Am I wrong?

Edit: Basically what CLTGT said in his first respose

 

[Codyroo]

Hi guys - trying to understand how to Federal Tax Credit would work?

I have already upgraded my Pure reservation to Touring. However, I noticed on the portal, they have the price listed and a deduction of Federal Tax credit of $7500.
For the people who had already received their Air's, was this deducted outright from the price or you would claim it on next year tax filing

Appreciate the clarity and guidance

View attachment 3720

Highly likely that you will have to file for the tax credit with your taxes (Highly unlikely that Lucid would deduct the 7,500 from the selling price).

I'm not an accountant, nor do I role play one with my D&D group. But, if I did.....
The tax credit should reduce the amount of money the Government says you owe at the end of the year (regardless of how much you paid in withholdings, estimated taxes, etc). Likely if you can afford a Lucid, you likely also have a tax liability > $7,500.

Lastly - Build Back Better (which did not pass in 2021) in its current state, capped the selling price of cars and trucks that would qualify for the $7,500 tax credit. Cars was ~$55,000 and Trucks/SUV's was ~$80,000. Thus, if BBB is passed in its current form in 2022, no Lucid vehicle would qualify for the $7,500 tax credit. If BBB passes in 2023 AND they don't make it retroactive to 2022, then if you buy your Lucid in 2022, you do qualify for the $7,500 tax credit.

This may also explain why some of us are "anxious" to purchase/take delivery of our cars in 2022. Same thing was happening for the DE purchasers in 2021 at the end of the year. Many of them raised their glasses to a certain senator from West Virginia for his decision not to back BBB at that time.

 

[Codyroo]

https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work

Link to an article on this.


Also - did a quick google search For example, in 2021, a single filer with taxable income of $100,000 will pay $18,021 in tax. What this means for your "EV Credit" is that you have a liability of $18,021, thus you could collect on the full $7,500 tax credit and your liability would decrease from $18,021 to $10,521. It doesn't matter how much money you had withheld from your paycheck or paid in estimated taxes.

Now, there are people who do everything imaginable to not have declared income (paid under the table, barter, etc), that sort of thing. They may "earn" 100,000, but because they were paid under the table on most of their earnings (say a waiter working a minimum wage job and NOT declaring tips) they would have only declared 25,000 to the government and had $75,000 in undeclared income (exaggerating, I know....but still) Then.... you make $25,000 a year you will be taxed $2,106.

In that case, you will only get $2106 of the 7500 tax credit. The remaining ~5400 goes bye bye.

 

[Ksa23]

https://cars.usnews.com/cars-trucks/how-does-the-electric-car-tax-credit-work

Link to an article on this.


Also - did a quick google search For example, in 2021, a single filer with taxable income of $100,000 will pay $18,021 in tax. What this means for your "EV Credit" is that you have a liability of $18,021, thus you could collect on the full $7,500 tax credit and your liability would decrease from $18,021 to $10,521. It doesn't matter how much money you had withheld from your paycheck or paid in estimated taxes.

Now, there are people who do everything imaginable to not have declared income (paid under the table, barter, etc), that sort of thing. They may "earn" 100,000, but because they were paid under the table on most of their earnings (say a waiter working a minimum wage job and NOT declaring tips) they would have only declared 25,000 to the government and had $75,000 in undeclared income (exaggerating, I know....but still) Then.... you make $25,000 a year you will be taxed $2,106.

In that case, you will only get $2106 of the 7500 tax credit. The remaining ~5400 goes bye bye.

Someone would have to be missing a few screws to try and declare a federal tax credit on unreported income but I'm sure it's happened before. Kind of ratting yourself out at that point

 

[DaveyBoyGT]

but you gotta make sure you owe at least 7500 right? so if you like owe 6000, they only give you the 6000 and you "lose" the 1500.

im still trying to figure out how much to adjust my withholdings by for the year when i get the car

You are correct. The EV tax credit is a nonrefundable tax credit, meaning that if your tax liability is less than $7500, you only get to credit the amount of your tax liability. Good news though, you owe no taxes for the year! There are some tax credits that are refundable, meaning if your tax liability is only $6000, you will get whatever the tax credit is above $6000 as a refund. The Earned Income Tax Credit is a refundable tax credit. The trick to getting the full EV tax credit is to have a tax liability of $7500 and above. If yours is not, then sell some stock, take an additional IRA distribution, get a second job, etc.

 

[DaveyBoyGT]

I will also be getting a BMW i4M50 in addition to my AGT this year.

Will I be able to receive a $15,000 credit as I will now have two vehicles(BEV) delivered in one year

The tax is available for each vehicle that is eligible for the credit. You can buy as many EVs you want in the same year and get the credit. Just make sure you have a tax liability to match the tax credits, or you will lose the remainder of the credit. The EV tax credit is nonrefundable in that sense.

 

[DaveyBoyGT]

If they remove the tax credit in the coming months or put a cap on the price, will it affect people who already took delivery? I believe they already tried to do that last December but the bill didn't pass.

That's a good question. Congress can do just about anything on the credit. Most likely, because this is an election year they won't tackle this issue until after the election and maybe not till next year. If senator Manchin has his way, it won't ever get done.

 

[Maverick]

One must pay 80% of your tax in advance but not pay too much in advance so that you do not still owe $7500. It is a fine line to avoid the prepay penalty but also be able to claim the entire credit.

It is typical for Uncle Sam and the IRS to make everything difficult.

First year I'm paying estimated taxes...how is paying estimated taxes any different from your company taking out the required amount of taxes for the year? Either way, aren't you documenting what you paid to the IRS for the year without regard to timing? It sounds like you're saying that whether through estimated tax payments or standard paycheck withholding, you need to underpay the IRS by $7500. If that were the case then folks buying qualified EVs in lower income brackets would not be able to take full advantage because they could underpay by $7500 without going below the 80% threshold. Let me know what I'm missing as that seems really strange or maybe I have completely misunderstood.

 

[WildRide47]

The tax is available for each vehicle that is eligible for the credit. You can buy as many EVs you want in the same year and get the credit. Just make sure you have a tax liability to match the tax credits, or you will lose the remainder of the credit. The EV tax credit is nonrefundable in that sense.

Plenty of tax liability (good or lucky trades in the stock market the last 3 years), so no problem with that.

Good to know that I will get the $15,000 tax credit for both of my BEV's purchased this year.

KySerenity's statement that if you prepay too much estimated tax you lose part or all the tax credit makes absolutely no sense to me. Comments welcome from you accountants out there.

If you do not earn enough, I understand you do not get the full credit, but prepaying the tax should not bar you from the credit. Don't understand where this is coming from.

 

[DaveyBoyGT]

Plenty of tax liability (good or lucky trades in the stock market the last 3 years), so no problem with that.

Good to know that I will get the $15,000 tax credit for both of my BEV's purchased this year.

KySerenity's statement that if you prepay too much estimated tax you lose part or all the tax credit makes absolutely no sense to me. Comments welcome from you accountants out there.

If you do not earn enough, I understand you do not get the full credit, but prepaying the tax should not bar you from the credit. Don't understand where this is coming from.

Paying estimated taxes does not bar you from taking the deduction. The only thing that matters is the tax liability based on your income. You just have to make sure that your tax liability is higher than $7500 before you take the credit or you lose the the remainder of the credit. If you are taking several tax credits you have to be sure that the other tax credits don't drop your tax liability below $7500 or you will lose the remainder of the EV tax credit.

 

[CLTGT]

Income
deductions
AGI
tax liability
payments and credits
due to/Refund

This is ultra simplified, but tax liability needs to be greater than $7500 to take the entire credit.

 

[WildRide47]

Paying estimated taxes does not bar you from taking the deduction. The only thing that matters is the tax liability based on your income. You just have to make sure that your tax liability is higher than $7500 before you take the credit or you lose the the remainder of the credit. If you are taking several tax credits you have to be sure that the other tax credits don't drop your tax liability below $7500 or you will lose the remainder of the EV tax credit.

That is understood, but KySerenity stated that if you prepay too much estimated tax it will decrease your eligible credit. That is what I take issue with.

Not the fact that I have to have at least $15,000 in federal taxes due to take the 15K credit.

 

[bhramabull]

Income
deductions
AGI
tax liability
payments and credits
due to/Refund

This is ultra simplified, but tax liability needs to be greater than $7500 to take the entire credit.

I had a similar question for my accountant. Typically we get a Federal refund every year coz somehow we end up overpaying taxes every year. This year we have a buttload of capital gains tax due (sold a rental property). Our accountant said our EV tax credit offset that, FANTASTIC. We also bought an Ioniq 5 so we can offset another $7.5k (confirmed you can buy as many such eligible cars as you want). She also confirmed that the EV tax credit is what gets accounted for first, before accounting for that refund that we get every year federally, mentioned above!
Oh and you won't get any excess credit money as a 'refund' or 'rolled-over' to the following year/s.
But again due your own due diligence and check all this with your accountant

 

[Amgz]

That is understood, but KySerenity stated that if you prepay too much estimated tax it will decrease your eligible credit. That is what I take issue with.

Not the fact that I have to have at least $15,000 in federal taxes due to take the 15K credit.

It shouldn’t bother you since what they said is wrong

 

[E LUCID 8]

Let’s hope they don’t impose the price and income limits until next year

 

[hydbob]

That is understood, but KySerenity stated that if you prepay too much estimated tax it will decrease your eligible credit. That is what I take issue with.

Not the fact that I have to have at least $15,000 in federal taxes due to take the 15K credit.

I thought you could only claim 1 EV credit per year?

 

[Shuasha]

Let’s hope they don’t impose the price and income limits until next year

The way it’s currently written is for cars in service on/after Jan 1, 2023.

Caps are:
Cars: $55k
SUV/Trucks: $80k

Income:
Single: $150k
Head of Household: $225k
Married:$300k

Hopefully Tourings ship this year, the credit would be nice.

 

[LCIDdreams]

Lucid is going to be under a lot of pressure by a lot of order holders to get their cars delivered by 12/31/22!!!

 

[Shuasha]

From a Reddit post, meaning I haven’t verified it’s real:
“..After December 31, 2021, and before the date of enactment of this Act, purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Internal Revenue Code of 1986, as in effect on the day before the date of enactment of this Act), and (2) placed such vehicle in service on or after the date of enactment of this Act, such taxpayer may elect (at such time, and in such form and manner, as the Secretary of the Treasury, or the Secretary’s delegate, may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of this Act.”

Sounds like if you’ve ordered it, but receive the car in 2023, it’s treated as this year?