Good Bye $7,500 tax credit!

[dmb]

If I place a order for a car today but the car doesn't get delivered until Feb 2023 and that is when all the financing paper work is done.....will i still be able to claim the 7500?

Lets say I find a dealer that can get me the car by december 31 2022, does that let me claim the 7500?

and am I correct in thinking that once biden signs the bill, lets say this week then any purchases or orders are subject to the new rules?

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[fgwinn]

1) If I place a order for a car today but the car doesn't get delivered until Feb 2023 and that is when all the financing paper work is done.....will i still be able to claim the 7500?

2) Lets say I find a dealer that can get me the car by december 31 2022, does that let me claim the 7500?

and am I correct in thinking that once biden signs the bill, lets say this week then any purchases or orders are subject to the new rules?

In the first case, you get the tax credit provided that you placed a “written binding contract to purchase”.

In the second case, I think you are out of luck. The transition period rule specifies that a written binding contract must be in place before Biden signs. The IRA says the new rules are not effective until after 12/31/2022. So it seems NO transactions between date signed and 1/1/2023 qualify for the tax credit.

EDIT 11-Aug-2022: It turns out that vehicles purchased and delivered between the date signed and 1/1/2023 are eligible for the tax rebate PROVIDED THAT THE CAR WAS ASSEMBLED IN NORTH AMERICA. So finding a Taycan on a dealer lot will only qualify if delivered in the next day or so.

 

[PDACPA]

I think we may be in agreement, now. But, I am not certain. Earlier you said, "If the effective date of 1/1/23 stays at final signing into law, then you will need to take delivery (put in service) your Taycan by 12/31/2022 to qualify to get the tax credit of $7,500 for Tax Year 2022." I don't agree with that statement, since the "transition rule" requires a "written binding contract to purchase" prior to Biden signing the bill, and your earlier statement implies that simply taking delivery prior to 1/1/2023 will qualify the transaction for the tax credit under the old rules.

The info in paragraphs 2, 3, 4, and 5, doesn't impact our analysis. The info in these paragraphs basically describes the new rules which in effect reduce the number of EVs that qualify after 12/31/2022.

I have a hard time believing that the Senate and House intended to disqualify all EVs ordered and delivered between the enactment date and 1/1/2023. But, that's the way the IRA bill seems to be worded. I suspect there are some Taycan customers who will take delivery of their car in the last four months of the year who do not have a "written binding contract to purchase" in place now. Hopefully the 87000 new IRS agents will go easy on those customers. Biden could do Taycan forum members a favor by waiting until 1/1/2023 to sign the bill.

You are correct. My previous statement was just based on how most new regulations impact the current ones (I had not pulled the actual text until after). They typically allow the old rule to run till year end, BUT this bill is different. It becomes effective on date of signing.

If as you say paragraphs 2, 3, 4, & 5 are the new rules, then that is how they are eliminating cars bought and placed in service after signing and until the end of the year as it states "placed in service after 12/31/2022" .. except for those four paragraphs.

I think most people have a deposit and an allocation and build number. I am not sure it is a binding contract. I had a document that listed my build, price of the built cost, dealer fees, sales tax etc. Signed by the Manger and myself. However, when you read the last line of it, the language says "this is not an offer or contract for sale." I am not an attorney, but I highly doubt this would be considered a binding contract. I would imagine most buyers do not have a binding contract which is going to be a problem if he signs it before they take delivery. They might need to talk to their salesman to preserve that $7,500 credit.

Oh, I can see those 87,000 agents targeting everyone who claimed the $7,500 credit on Form 8936 and have a date in service after the signing.

 

[Tooney]

Oh, I can see those 87,000 agents targeting everyone who claimed the $7,500 credit on Form 8936 and have a date in service after the signing.

Will increase business for CPAs, yes?

 

[fgwinn]

You are correct. My previous statement was just based on how most new regulations impact the current ones (I had not pulled the actual text until after). They typically allow the old rule to run till year end, BUT this bill is different. It becomes effective on date of signing.

If as you say paragraphs 2, 3, 4, & 5 are the new rules, then that is how they are eliminating cars bought and placed in service after signing and until the end of the year as it states "placed in service after 12/31/2022" .. except for those four paragraphs.

I think most people have a deposit and an allocation and build number. I am not sure it is a binding contract. I had a document that listed my build, price of the built cost, dealer fees, sales tax etc. Signed by the Manger and myself. However, when you read the last line of it, the language says "this is not an offer or contract for sale." I am not an attorney, but I highly doubt this would be considered a binding contract. I would imagine most buyers do not have a binding contract which is going to be a problem if he signs it before they take delivery. They might need to talk to their salesman to preserve that $7,500 credit.

Oh, I can see those 87,000 agents targeting everyone who claimed the $7,500 credit on Form 8936 and have a date in service after the signing.

One of the elements of a binding contract is that it must include an offer from one party to the other. I don't think it requires a non-refundable deposit since a promise to pay upon delivery would qualify as consideration. But an agreement that included "This is not an offer" text would definitely be something the IRS agents would be looking for. Audits specifically targeting EV tax credit non-compliance would be very inexpensive for the IRS to conduct and would only require reviewing a couple of documents. I could see them grossing $15000 per day in recovered tax credits without even breaking a sweat.

I checked the text of my sales agreement and I am comfortable with the wording that reads, "... and that the contract is not binding upon either the dealer or the purchaser until signed by an authorized dealer representative" since the agreement is signed by both parties and dated 5-Aug-2022.

 

[fgwinn]

Will increase business for CPAs, yes?

I doubt that. Your CPA will not be able to convert a non-binding contract into one that qualifies when you get audited one or two years down the road.

 

[PDACPA]

Will increase business for CPAs, yes?

I did quite a number of Model 3 credits when they came out in 2018.

 

[PDACPA]

I doubt that. Your CPA will not be able to convert a non-binding contract into one that qualifies when you get audited one or two years down the road.

The CPA will (or should) request the "binding contract" before calculating the credit on the tax return. If there is not a binding contract, then no credit will be taken on the tax return. More than likely, that client will find someone who will take the credit without the binding contract and then will owe the tax and penalty and interest when audited.

 

[PDACPA]

One of the elements of a binding contract is that it must include an offer from one party to the other. I don't think it requires a non-refundable deposit since a promise to pay upon delivery would qualify as consideration. But an agreement that included "This is not an offer" text would definitely be something the IRS agents would be looking for. Audits specifically targeting EV tax credit non-compliance would be very inexpensive for the IRS to conduct and would only require reviewing a couple of documents. I could see them grossing $15000 per day in recovered tax credits without even breaking a sweat.

I checked the text of my sales agreement and I am comfortable with the wording that reads, "... and that the contract is not binding upon either the dealer or the purchaser until signed by an authorized dealer representative" since the agreement is signed by both parties and dated 5-Aug-2022.

Yes, your document sounds different than mine was, though they honored my price (few percent below MSRP and prices were increasing) when I took delivery last September 2021 so not an issue in my case.

I just read so many posts here and on the FB groups of guys with their "deposit" for an allocation and all they have is a deposit at a Porsche dealer and probably do not even have an allocation. They are not going to qualify for the $7,500 or any EV credit.

Maybe Congress will change that language that it is effective on the date of signing. Would make sense as they are changing the rules of the game during the game for people with order, incoming cars, and probably do not have the binding contract.

 

[fgwinn]

.....I just read so many posts here and on the FB groups of guys with their "deposit" for an allocation and all they have is a deposit at a Porsche dealer and probably do not even have an allocation. They are not going to qualify for the $7,500 or any EV credit.....

I don't think that not having an allocation would necessarily invalidate the EV tax credit. It would still be possible to execute a written binding contract where the dealer promises to deliver a car and the purchaser promises to pay for it. I do agree that most of the pre-order deposit receipts probably do not qualify as a binding contract.

 

[Torv]

A nice summation of this discussion from the Washington Post:

https://www.washingtonpost.com/clim...v-ira-credit-bill/?itid=hp-top-table-main-t-4

 

[tbinmd]

A nice summation of this discussion from the Washington Post:

https://www.washingtonpost.com/clim...v-ira-credit-bill/?itid=hp-top-table-main-t-4

Article is behind a paywall.

 

[whitex]

As a non-US citizen that looks fair enough to me.
Supporting the less well off buy a domestically manufactured product makes more sense than helping somebody wealthy to blag a bit off the tax payer when buying an entirely foreign made car.
Probably lucky to have got away with it so long!

It depends on what the goal of the subsidy is. If the goal is to incentivize people to buy more EV's, then why restrict based on price or income? More incentives get more EV's on the road - why care who bought them? If the assumption is everyone is already sold on EVs, then no incentives are needed. If the government wants to help the "less well off", they can just give anyone under some threshold money for any car, maybe they cannot afford an EV but could use the government help to afford a nice reliable ICE car. If the goal is to incentivize locally build inexpensive EV's, why limit eligibility based on income? Is it to incentivize the more "well off" people to buy ICE cars or to buy foreign cars? Or, if the incentive is to help with EV innovation, well, that usually happens on the higher end of the price range. You could try to argue that people who buy a $100K car will buy it with or without an incentive, but I would counter that this is not true. Tons of people (myself included) who bought Teslas did so because of the incentives, including the days of Model S being the only choice. If it wasn't for people buying Teslas, there is a very high likelihood that the car industry would not be shifting to EV's today.

My main point is that government programs often conflate many goals into one program. The result in this case is that as written, there are no cars (of very few at best) eligible for the new incentive today. Unless of course that was the goal, set aside a budget for a program for which almost nobody will qualify, then later use that money as surplus "leftover" money from the program, and in the meantime grab some credit for doing something (on the surface) good for the environment. Next up, 50% subsidy for all energy efficient window upgrades, for homeless people only.

 

[PDACPA]

I follow the Rivian group on FB. A poster just put up his email he received from Rivian. They are offering a written binding contract for him to sign ($100 of his $1,000 deposit is non-refundable upon signing) to preserve his tax credit. Photos from Rivian FB Group from Kevin KJ.

 

[whitex]

Since you're leasing the car, the manufacturer (Porsche) claims the tax credit instead of you and instead you get a discount on your lease rate instead. So you have nothing to claim on your 2022 Federal tax return as its taken care of already. You can only claim the fed tax credit if you BUY the car, not lease.

Even simpler than that. The credit goes to the leasing company, not the lessee.

Tesla used to just plain pocket it on leases, then they changed to a slightly different scheme where they increase the residual value of the car by the rebate amount, which means that they got to charge interest on the $7,500 for the entire duration of the lease, and if you decided to buy the car at the end, you essentially had to pay them back the $7,500 (via the increased residual value).

All that said, I wonder how the latest government grant (it's not longer a tax credit) is going to work for leases, since every leasing company makes more than the cap, meaning they would not qualify to claim the rebates as they do today.

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