Featured Very few EVs qualify for the federal tax credit as of 2024

That article only covers the consumer credit that applies to an individual buying the EV. The credit goes to whoever is buying the car, and the requirements apply to them. With a lease, it is the lease company that is buying the car, so they are the ones that have to meet any requirements for the credit. Since leasing out your car is a business use, the commercial EV credit rules apply.

Commercial Clean Vehicle Credit | Internal Revenue Service

I don't know how the credit works in relation to the company's tax liability; these are business taxes. But any situation where a claimed credit doesn't apply would be a problem for the company. The leasee is making no claims on their taxes in regards to the EV. It's why they could get the full benefit of the credit amount on a lease since the Volt and Leaf.

Now, the point of sale application of the credit is different. The buyer since has to meet the credit requirements, and they can end up owing the credit back if they don't have a high enough tax liability.

 

We were talking about $7500 lease cash deals for EVs that do not qualify for the consumer credit due to the North American built requirement. The consumer qualification to receive EV tax credit only applies to consumer purchased EV. That's not what we are discussing here.

 

And in that case, it doesn't doesn't sound like the consumer is actually transferring the credit to the dealer. It is more a pledge that they are pledging to apply their credit to the car's purchase. So the government spots them the credit amount to the dealer when the car is bought.

This does need more official clarifying.

 

Under your tax credit transfer scenario, and the purchaser doesn't qualify - wouldn't that be the equivalent of the purchaser writing a bad check? Who's responsible for the bad checks?

Bottom-line, I'm just saying that people should be very careful when they're signing high dollar contracts - especially if you think you can game the system. The system will eventually catch up with you and you can't discharge IRS bills through bankruptcy. This is my last post on this subject, because it seems I've stirred up a hornets nest..

 

Don't think you've stirred up a hornets nest.

Just a very silly way to enact an incentive program.

The discussion is more a commentary on the confusing and difficult way to access a purported incentive.

Imagine someone saying I will give you a discount if you promise to incur this much debt/tax liability to me this year- and then I'll forgive a portion of that liability.

For many it makes no sense and is more a financial monkeyshine involving how to generate a $7500 tax liability that year or find a way to game the system so the Dealer assumes the tax liability and the Dealer gets the discount to incentivize the purchase in the amount and way the dealer choses.

 

if that's true .... then rules have changed significantly since I retired from going to Bankruptcy Court for my customers some 5 years ago or so.

EDIT
(got me wondering)
Nope ... it's still do-able
Declaring Bankruptcy | Internal Revenue Service.
.

 

My guess on how that process works is that the government is forwarding the buyer's future credit to the dealer. If the buyer ends up not qualifying for the full amount, they will then have to reimburse the feds.

A fair warning about being careful.

The first clean car incentives were tax deductions. Tax credits are a natural step that are better for consumers. They are also an easier sell to some parties than rebates. The non- refundable and roll over part of the credit is what makes it a mess for consumers.

A better system would have been direct subsidies to the manufacturer for cars registered. That should eliminate the effect on market prices that credits and rebates. The manufacturer pocketing the subsidy should be kept in check by competition with other manufacturers. Japan was using direct subsidies when the Prius first came out.

 

Some say there are no more qualifications, you just get the credit at the point of sale and that's that.

But I'm afraid you may be right.

In Colorado in 2024, if I could find a base LT1 Bolt for the MSRP of $26,500 + $995 destination charge and subtracted the $7,500 federal tax credit and the additional 2024 $7,500 Colorado incentive, I could get a brand new Bolt for $12,495! And that's well within my price range and I no longer have a car payment with the Avalon so I really would love to get one!

But I can't find a base Bolt, so I'm looking more at $10,000 more for a $35,000 or so Bolt, and there's that possibility I'd have to pay the federal tax credit back, at least part of it... So I give up. No second car that's an EV for me any time soon.

 

While many seems to oppose EV subsidy, I am for any help to lower the cost. I've claimed EV tax credit for the last 4 PHEVs I purchased. If there was no tax credit, then I would have not bought any of them and still be driving two gassers (Gen3 and Pathfinder Hybrid).

The great thing is that with the credits and rebates and strong used car market, I have not spend any additional money on purchasing those four cars. Yes, the very first capital $25k I used for the purchase of Gen3 in 2015 without tax credit was extended for the 4 PHEV subsequently purchased without additional capital input.

Certainly, this can not continue forever, but as long as the system allows me, I will try to maximize the credit to reduce the cost.

 

I like that it can lower prices, but it also is complicated, which I don't like.

In the end, with the tax credit I and many others are probably closer to owning an EV some day than if it didn't exist.

 

Do you really "get" $7500 for the Bolt?

If you buy the Bolt, I don't think you "get" $7500.

I you choose to generate a $7500 tax debt to the government you will get $7500 of that debt forgiven - I don't think you "get" anything other than a paper credit for your tax bill. You will still pay the asking price for the Bolt.

Am I missing something?

 

Purchase:
2023 and before: you get $7,500 off of your taxes if you purchase a qualifying EV, which applies to your tax return that you will do the next spring (so either tell your boss to stop paying your income taxes for a few months or get it in your tax return the following year).
2024 and after: you can either get $7,500 off of your taxes, or you can have it applied at point-of-sale. If the car's purchase price is $27,500 and you opt for the point-of-sale credit, the government cuts the dealer a $7,500 check and you have to pay or finance the other $20,000. Again, it has to be a qualifying EV.

Lease:
All years: The dealership gets the $7,500 tax credit. But they can decide to lower the lease payments as a result, therefore transferring their tax credit to the customer, which is the tax credit loophole because A) someone who wouldn't qualify for the tax credit can now still benefit from it and get a cheaper EV and B) because for some reason there are EV's that qualify for the $7,500 lease tax credit but don't qualify for the $7,500 purchase tax credit, so again, allowing you to benefit from the tax credit on a car that if you were to just purchase it you wouldn't get any tax credit on it.

 

It depends on how you interpret the cash flow. $7500 I did not have to pay to IRS is $7500 I earned. As old financial saying goes, "a penny saved is a penny earned".

 

So here is the point for me that is unbelievable:

If I live in Colorado and buy a Bolt the Dealership will throw me $7500 from the Federal Government and then just for kicks throw me another $7500 from Colorado.

In my simple mind everyone and I mean everyone in Colorado needs to hit the Dealerships and get in on this deal. As you buy the Bolt or Tesla the Dealers are throwing $15,000 at you as you walk out the door.

After a year you can the sell the vehicle for quite a profit?

How are the Dealers keeping people from kicking down the doors and storming the Dealerships?

I agree. I took advantage of a $4500 rebate when we bought our PHEV in 2019. I engaged a Financial Advisor/CPA who helped me preform monkeyshines with my accumulated 401k and a Roth to manufacture a liability to the Federal Government to access the rebate that year- never again.

 

not everyone wants an ev, cost aside. colorado has been offering cash for ev's and phev's for a long time.
the only caveat for the fed credit is the cost of the car and income limits. if your tax return is over the limit, the irs will come back at you for the credit.
it is actually cheaper to buy a new bolt in many states than a used one. as was the case for prius prime for many years.
even looking at teslas this summer, i was getting a net of 30k on the model 3, and most used were in that range or more.

 

The problem is, it's complicated.

The cheapest Bolt here in Colorado is $30,000. I did find a new one 1,200 miles away (Florida?) that is going for $20,290. I do believe I don't have to buy it in Colorado to get the Colorado credit, I just have to live here (which I have over 50 years of doing just that). So I might try to get that one. That would be cool! But I need to be sure I can get the Colorado credit applied at the point of sale, as $20,000 is a little too much for me to finance. And who knows if it's not just a typo or something.

I also am pretty sure I will not, in any way, be getting the Federal Tax credit. In fact, there's a chance I will not owe any federal income taxes this year, due to medical and other issues and how they will affect my income taxes.

I also do not have the time right now to drive from Florida to Colorado in an EV. There's a small chance I might in March, but who knows if there'll be any cheap Bolts left by then.

There's also the fact that I don't really need a second car. Even if I got the federal tax credit, would $5,000 for a second car that I have to drive from Florida to Colorado in really be worth the effort?? Or should I just drive the car I have into the ground and then look for a car??

 

I appreciate the back and forth as I wrap my mind around this.

Isn't the Colorado rebate also a Tax Credit monkeyshine?

Electric Vehicle Tax Credits | Colorado Energy Office
"Colorado taxpayers are eligible for a state tax credit of $5,000 for the purchase or lease of a new EV on or after July 1, 2023 with a manufacturer’s suggested retail price (MSRP) up to $80,000. Lease agreements must have an initial term of at least two years. Beginning January 1, 2024, Coloradans purchasing an EV with an MSRP up to $35,000 will be eligible for an additional $2,500 tax credit."

I understand the mechanics of tax credits and what they are.

What I have problems with are when we say I am getting $7500 from the Feds and $7500 from the state. That is not accurate if I am understanding things correctly. You are simply getting credit on your tax debt.

 

idk about colorado, but the fed is no longer a credit on tax debt. that ended 12/31/23.

ma also has a $3,500. credit, no tax debt required.

and there are used ev credits available as well.

 

What does a $3500 credit mean - is this actual realized money? Must you incur a tax debt to redeem it? That is what I am struggling to understand.

I do want to wrap my mind around what we are discussing in this topic - if it is true realized money or paper credits?

 

every state is different. idk what the deal is in ma, but according to my cpa, i will get a credit on my 2023 taxes of $7,500. federal, and $3,500. state because i have the liability.
so if i had a $10,000. liability to the feds, it would be reduced to $2,500. you can call it a paper credit, but either you don't have to send the money, or if you have already paid it (more likely) you get a refund.
and that is under the old rules.
starting 01/01/24, you can elect to transfer the credit to the dealer, and they take it off of the price of the car. and the only way you would be liable is if your income came in over the max allowed.
then you would have to pay it back to the irs.
the dealer is held harmless, and they get the money from the irs every time they make a sale.