EV Federal Tax Credit After Selling Car?

Correct

https://www.cargurus.com/Cars/articles/how_do_taxes_work_on_private_car_sales

https://www.carvana.com/research/2020/03/what-to-know-about-taxes-when-you-sell-a-vehicle/

Establishing how much is taxable, how it applies to leases, etc isn’t quite as cut and dry, and yah, most people don’t report it, but if you’re profiting on the sale, you are supposed to claim it.

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If you’re asking about capital gains on the profit of the flip, that’s a different topic.

Humor me please. I’m clearly not a tax attorney, I’m just thinking since the car is not my asset, I’m not entitled to capital gain tax.

This is like you borrow the bank’s assets (similar to shorting a stock, but in this case you expect the car price to go up) and make a profit, but cars are not securities so I think the tax treatment is not the same. It’s all depending on the wording of the tax code and this is not clear to me.

Another example, crypto traders are not entitled to wash sale rule, because cryptos are not securities. But in crypto case, it’s YOUR asset, so you have to pay capital gain tax.

There’s been much debate here on the tax application of selling a lease and what is considered “profit” without an agreed on consensus. There are some that argue that any money that you capture beyond your net expenses is considered income rather than capital gains. There are some that argue that any money you get from having your lease bought out is considered income, even if you put significant money down and are only recouping some of it.

As for the assets, it likely depends on how the buy out is treated. Are you selling the purchase option that you’re contractually bound to? Are you transferring interest? Is the overall transaction treated as you exercising a purchase buy out and then reselling? Some (maybe all) states look at the initial lease price as a cost bases if you buy out a lease and then later sell it, rather than the purchase price when you bought it out, suggesting some sort of tie in.

Thus far, I think the only thing universally agreed on is that if you make more money than you put into the lease, you definitely are supposed to pay taxes of some sort, although most don’t report it. As your move down from there, the debate gets louder.

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Not an accountant or tax attorney but I did once stay at a Holiday Inn.

I think you are technically obligated to pay taxes any time you make money (earned income or capital gains). However, I also think it is reasonable that taxation laws on gambling may apply here.

You are required to pay taxes on gambling winnings. However, you are allowed to deduct your gambling losses against those winnings.

If you apply that same concept here, you would owe taxes based on the sale of your lease contract but you could also deduct the cost of all of your lease payments against that gains. So if you make $6k on the sale of a lease contract but have other lease payments exceeding $6k in the same year, I would expect that you wouldn’t owe any taxes.

I did almost an hour of reading last night and ultimately didn’t reply. I am not a CPA, mine will tell you I’m honest to a fault (though I’m not trying to pay any more than my “fair share”).

I don’t find any language in the IRS forms (primarily 8936) or the notices, but my sense is that selling on 1/1/2022 makes a difference (it’s at least more defensible). The only relevant portion may be 30D(f)(5) on recapture, but I couldn’t find much.

On the point of whether the IRS will come after you on the tax credit and/or cap gains:

The IRS is definitely under-staffed right now, but any of these budget/stimulus bills that need revenue offset can easily get some by hiring more auditors. Know that this is something they are not blind-to, and is on their short list.

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How is gambling same as buying/selling an asset or option for an underlying asset?

Won’t help you when you have to explain your way out of it.

There is a whole thread where this has been discussed in detail.

But i can tell you it’s a biiiig stretch…

And

Btw, putting tax discussion aside, I don’t see selling the car in the same year can cause any harm to the IRS.

The incentive is for the lifetime of 1 vehicle: everyone is qualified to buy an EV car and get credit given he has enough tax liability, it’s fair and square. What if I don’t like the vehicle in the first week of ownership? What if my financial situation changes and no longer can make payment?

If the goal is to limit CO2 emission, it serves it purpose for that vehicle. The gain people are making is just supply-and-demand law in action.

And proving I buy the car for resale purpose only is a tough sale in any court.

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Have resold car and captured ev credit. There is no language in the tax code requiring a minimum number of days of service. It only says car must not have been titled before and been placed in service. It does not say must be continuously maintained in service for rest of year.

Verbatim text of law

Blockquote §30D. New qualified plug-in electric drive motor vehicles

(a) Allowance of credit

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

(b) Per vehicle dollar limitation

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does anyone know about the limit of claiming the EV tax credit if your adjusted gross income exceeds the limit of $400K? i read you can’t claim the full amount but i dont know how much you can claim

For the IRS there is no limit…yet.

For CA, there’s a bunch but I don’t know what state you are in.

Are you talking about the current tax credit or the proposed one in the bbb?

Current federal credit is for 2021 is not limited by income (it is high-bound by your tax liability, since it is not refundable).

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