Does anyone have insight into stipulations around the $7500 federal tax credit? If you bought and sold a car in the same year, does it disqualify you from claiming the credit?
I’ve searched online and haven’t found anything definitive.
It sounds to me that you would only get credit for the time you owned the car. $7500/12
Also, if you don’t have enough of a tax burden to meet the deduction, the overage is lost.
The IRS document above references if you transfer the vehicle to a business, and I’m 95% sure this would apply the same in the event of a sale of the vehicle.
Find a qualified CPA and ask. Also, don’t attempt to rip the government… that will backfire gloriously and all at once. Trust me, they’ve thought of every scheme possible before putting any tax credits into place.
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https://www.edmunds.com/fuel-economy/the-ins-and-outs-of-electric-vehicle-tax-credits.html
The federal tax credit isn’t applicable to an electric vehicle being purchased for the purpose of reselling it.
Do your own research, but should be able to claim the full credit.
Buying and then later reselling doesn’t mean you purchased it for the purpose of reselling (i.e. dealer or broker avoiding sales tax). You could do a lease that has the credit and sell out the lease in 3 months with no repercussions, should be same for purchase.
IRS guidelines to qualify:
• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
• You placed the vehicle in service during your tax year.
• The vehicle is manufactured primarily for use on public streets, roads, and highways.
• The original use of the vehicle began with you.
• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States.
Agree on the first point. As an accountant, and someone who has worked in audit, ops, and financial reporting, I would never suggest that you try to rip the government. I’d also suggest that the reality of you facing an audit from the IRS is less than 1%, slightly higher depending on your income but there certainly are things that can ‘trigger’ one.
Definitely reach out to your tax guy and as them how to address the credit.
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Definitely not looking to run a scheme. Just considering trading in for a different vehicle and wondering if, for example, selling the car on Dec 31st vs Jan 1st would make some sort of difference as far as credit eligibility.
Doesn’t sound like it’s that clear cut.
If you lease, the tax credit goes to the bank… but it should be passed on the buyer via a cost reduction before lease. I’m not 100% sure how that would functionally operate, but that’s what I’m reading
Not to derail, but I think the 4xE flipping suggests they have NOT thought of every possible scheme. They left some meat on the bone, and it was found.
Why do you say it should?
Sure, we’d all like it to be, but there’s certainly no obligation for them to do so.
Well, we’ll all just have to wait and see. The IRS loves to come back a few years later with penalties and fines and it can be some time down the road.
Maybe it’s totally possible to skate under the radar. Maybe they (the irs) genuinely doesn’t give AF, or even condone it to a degree just get the cars in the field and make it look they’ve done something grand.
I guess you can only do it once really.
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I can imagine a dealer that would keep this news to themselves of someone didn’t ask.
It was my understanding the gov has stated that it should be reduced from the car from a lease. But I can’t always keep track of where I’ve read what I’ve read.
Further, I’m not that familiar with the process as I don’t want an electric vehicle right now.
The best source of information on the tax credits is the IRS documentation itself ultimately.
The dealer isn’t involved in if the bank decides if they want to pass on an equivalent incentive or not.
There are banks that presumably don’t pass on anything. There are banks that subvene their EVs through inflated RVs or marked down MFs. There are banks that give an equivalent amount incentive. The dealer doesn’t get to choose which, if any, of those apply.
Now, a dealer could, for example, mark up a vehicle that gets an equivalent incentive from the bank so that it’s a wash, but your contract would reflect the inflated sales price with the itemized incentive and in those cases, the banks/manufacturers tend to advertise the incentive, so it’d be tough to pull off without anyone noticing.
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Flipping 4xes is kind of a loop hole, not sure how the tax works in this case. Cars are NOT flippers assets, so is the gain here considered short term gain by tax code?
Plus unless companies like Vroom/Carvana work with IRS to report the transactions, I don’t think they will ever know about it and go after you. In the past they had to get court order to have Crypto exchanges to disclose personal info of high-volume traders. For a few grands per flip, I don’t think you all have to worry.
I’ve heard of some scam where people will file their taxes ASAP using someone else’s VIN number and thus claiming the EV rebate.
If we’re talking about how the taxes work regarding the federal tax credit, it’s irrelevant to people that are leasing these and flipping, as the lessee never claims the federal tax credit.
If you’re asking about capital gains on the profit of the flip, that’s a different topic.
That would clearly be illegal, but I think it’s a gray area when you buy and sell a EV within the year because only first owner can claim the tax credit and the goal of the tax credit is to accelerate EV adoption.
No it does not disqualify you. If bought and sold in a bona fide private transaction, without the intent to become a reseller, it qualifies for tax credit … Source - personal experience …
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You can certainly do that but that’s illegal…
Right. The rebate is suppose to be only for the first registered owner
In what context is this applicable? If you bought (not leased) a car for private use and happen to make a profit on resale due to the crazy market conditions now, are you implying you would owe cap gains tax on the profit?