DIDN’T GET THE $7,500 FEDERAL TAX CREDIT!

[bg002h]

I bought a Foundation Series All-Wheel Drive Cybertruck and took delivery on September 28, 2024. My CPA filed my 2024 Federal income tax return, but the IRS bumped my return back saying that I wasn’t eligible for the $7,500 tax credit. I got a copy of IRS Form 8936 and observed that there is an upper limit on which electric vehicles are eligible. Pick-up trucks have a maximum of $80,000. I paid more than $80,000. Tesla’s marketing Ho’s didn’t point that out on the website. I assumed that my Cybertruck was eligible.
This explains why Tesla is now selling Cybertrucks for $79,990. You don’t want to put on any add-ons that would push the sales price above $80,000, if you want the $7,500 tax credit. At $79,990, Tesla’s website says that you are eligible for the $7,500 Federal Tax Credit. I’m assuming that destination charges $1,995 are not included in the sales price.
Not buying another Tesla for 4 years.

Welcome to the world of rich people. Ya don’t get stimmy checks. You don’t get tax breaks and write offs every one else gets.

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[cybercricket]

Welcome to the world of rich people. Ya don’t get stimmy checks. You don’t get tax breaks and write offs every one else gets.

Pretty sure you got it backwards - to get every write off imaginable one has to be rich, everyone else gets peanuts

 

[REM]

Pretty sure you got it backwards - to get every write off imaginable one has to be rich, everyone else gets peanuts

Everyone is capable of using the tax codes to their full advantage. Wealthy people tend to do just that, and at a much higher rate.

 

[cybercricket]

Everyone is capable of using the tax codes to their full advantage. Wealthy people tend to do just that, and at a much higher rate.

I doubt that. There are things (for example Investment Credit) that are tied to big money which most people don't have.

 

[PungoteagueDave]

With point of sale (not this situation), one doesn't even need that...

That’s not true. When you use point of sale credit, Tesla reports it to the IRS, and you sign a form at sale that says you agree to report the credit that you already received, and reconcile it on your return. If your total tax liability (income tax only, excluding self-employment taxes, if any) is not greater than $7,500, you must refund the difference on your tax return. How do I know all this? Last week I took delivery of a ‘25 CT with point of sale credit, and next week my wife will take delivery of a new ‘26 Model Y with point-of-sale credit. The paperwork on the point of sale credit on both is explicit and there’s no way to get around it because Tesla reports it directly to the IRS. In our case, we must have total income tax liability (before any withholding or estimated tax payments) of $15,000 in order to keep both of the credits we are benefitting from in 2025.

 

[M0unt41nm4n]

I got the $7500. ? Claimed it under my s-corp… got the $7500 because there is no income or MSRP on EV trucks for businesses. Passed straight through as a credit to my personals on my K1.

It’s sad you have to use loop holes to get it… but I got it.

 

[mongo]

That’s not true. When you use point of sale credit, Tesla reports it to the IRS, and you sign a form at sale that says you agree to report the credit that you already received, and reconcile it on your return. If your total tax liability (income tax only, excluding self-employment taxes, if any) is not greater than $7,500, you must refund the difference on your tax return. How do I know all this? Last week I took delivery of a ‘25 CT with point of sale credit, and next week my wife will take delivery of a new ‘26 Model Y with point-of-sale credit. The paperwork on the point of sale credit on both is explicit and there’s no way to get around it because Tesla reports it directly to the IRS. In our case, we must have total income tax liability (before any withholding or estimated tax payments) of $15,000 in order to keep both of the credits we are benefitting from in 2025.

I disagree, per the IRS (and law as written):
https://www.irs.gov/newsroom/topic-...it-and-previously-owned-clean-vehicles-credit

Q4. What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)

A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.

Q10. What if I end up exceeding the modified AGI limitations for the year? (added Oct. 6, 2023)

A10. If your modified AGI exceeds the limitations for the taxable year, you will be required to repay the amount received for transferring the tax credit as an addition to tax for the tax year the vehicle was placed in service.

Are you sure the paperwork doesn't say that if you exceed the income limits you'll have to pay it back?

Because that what the IRS says it needs to say:

.02 Disclosure Obligation of Taxpayer Electing to Transfer the Credit. Not later than the time of sale, the taxpayer electing to transfer the credit under § 30D(g) or § 25E(f) must furnish the information listed in sections 5.02(1) through 5.02(3) and 5.02(11) of this revenue procedure to the registered dealer and make the attestations in sections 5.02(4) through 5.02(10) through the IRS Energy Credits Online Portal under penalty of perjury. Not later than the time of sale, the registered dealer must upload the information provided by the electing taxpayer in sections 5.02(1) through 5.02(3) and 5.02(11) of this revenue procedure through the IRS Energy Credits Online Portal. The information the electing taxpayer must furnish is as follows:

(1) Date of the taxpayer’s transfer election;

(2) The taxpayer’s TIN;

(3) A photocopy of the taxpayer’s valid, government-issued photo identification document;

(4) An attestation, that either:

(a) The taxpayer’s prior year modified AGI did not exceed the modified AGI limitations, provided in §§ 30D(f)(10) (in the case of the § 30D credit) or 25E(b)(2) (in the case of the § 25E credit), as applicable, or, if not known, to the best of the taxpayer’s knowledge and belief, the taxpayer’s prior year modified AGI did not exceed such limitation, or

(b) To the extent of the taxpayer’s knowledge and belief, the taxpayer’s current year modified AGI will not exceed the modified AGI limitation;

(5) In the case of the § 30D credit, an attestation that the vehicle will be used predominantly for personal use;

(6) In the case of the § 25E credit, an attestation that the taxpayer is a “qualified buyer” as defined § 25E(c)(3);

(7) An attestation that the taxpayer will file an income tax return for the taxable year in which the vehicle is placed in service on or before the due date of the return (including extensions), reporting the taxpayer’s eligibility for the § 30D or § 25E credit, as applicable, including the vehicle’s VIN, and the taxpayer’s election to transfer the credit to the eligible entity, and repaying any credit amounts subject to recapture, if applicable;

(8) An attestation that the taxpayer is making this election prior to placing the vehicle in service and that the taxpayer has made no more than two transfer elections (including the election for which the attestation is being made) during the taxable year;

(9) An attestation that in the event the taxpayer’s modified AGI exceeds the applicable modified AGI limitations, they will repay the amount received as an addition to tax for the tax year the vehicle was placed in service.

(10) An attestation that the taxpayer has voluntarily elected to transfer the credit; and

(11) Such other information as may be required by the IRS Energy Credits Online Portal.

 

[PungoteagueDave]

I disagree, per the IRS (and law as written):
https://www.irs.gov/newsroom/topic-...it-and-previously-owned-clean-vehicles-credit




Are you sure the paperwork doesn't say that if you exceed the income limits you'll have to pay it back?

Because that what the IRS says it needs to say:

Incorrect. I am a CPA. You are confusing resale of used EVs with the point of sale credit transfer on the sale of a newly manufactured vehicle.

There are two ways that you can be forced to recapture (repay) an EV credit received at the point of sale. The first is if you exceed the AGI limits. This can be due to a simple error or mistake in estimating the AGI because you don’t yet know that number - you simply attest that last year you didn’t hit the max, and that you don’t expect to do so this year. But when you file, the truth is known, and if you exceeded it, you must repay. The same is true for the tax liability test.

The credit is available only in the year of purchase. Unlike many other credits, such as for renewable energy (solar panels and the like), when you buy an EV, the credit can only be used to offset that year’s federal income taxes. Other credits can be carried forward and used in subsequent years, but not so with EVs. The transfer of the credit at point of sale was a Biden Administration change to the former practice of claiming the credit on your tax return. The change was intended to spur EV sales by effectively reducing the upfront cost on a direct basis rather than waiting to get the credit when filing. However, it did not change the underlying fact that you can only use all of it if you have at least $7,500 in income tax liability for the year.

The law included a requirement that put you in the same position as with prior versions of the EV credit - if you don’t owe that much tax, you can’t have the whole credit and must repay the excess received at point of sale in excess of your actual tax liability for the year. You cite above the actual language requiring the selling dealer to report all of the details to the IRS, and the purchaser must sign a statement (I just did so) saying they understand that they will have to pay the credit (or a portion thereof) back when filing if they don’t have that much total income tax due (excluding self employment taxes), or if they fail the AGI test.

 

[wanders]

Do you live in your own house and have a setup for a backup generator ? You can try to claim your CT as the battery storage, ask your CPA about that.

I remember someone theorizing this... has anyone gotten this to work? (the rebate)

 

[mongo]

Incorrect. I am a CPA. You are confusing resale of used EVs with the point of sale credit transfer on the sale of a newly manufactured vehicle.

No, I am not. I am referring to point of sale of new clean vehicle credits.

With point of sale (not this situation), one doesn't even need that...

The law included a requirement that put you in the same position as with prior versions of the EV credit - if you don’t owe that much tax, you can’t have the whole credit and must repay the excess received at point of sale in excess of your actual tax liability for the year. You cite above the actual language requiring the selling dealer to report all of the details to the IRS, and the purchaser must sign a statement (I just did so) saying they understand that they will have to pay the credit (or a portion thereof) back when filing if they don’t have that much total income tax due (excluding self employment taxes), or if they fail the AGI test.

The IRA law change added the transfer option which the IRS says (and I quoted and linked to above) does not have a clawback provision for tax liability, only income threshold (eligibility) .
Specifically 30D(g) which is separate and has it's own recapture clause

(10) RECAPTURE.—In the case of any taxpayer who has made an election described in paragraph (1) with respect to a new clean vehicle and received a payment described in paragraph (2)(C) from an eligible entity, if the credit under subsection (a) would otherwise (but for this subsection) not be allowable to such taxpayer pursuant to the application of subsection (f)(10), the tax imposed on such taxpayer under this chapter for the taxable year in which such vehicle was placed in service shall be increased by the amount of the payment received by such taxpayer.’

Further, Form 8936 shows in the event of transfer and meeting the income limits, the credit received isn't even recorded on one's 1040. Only if it is claimed at filing time is tax liability applied.

Transfer flow:

At time of filing flow:

Instructions

Credit transfer election. You elect to transfer the credit of a new clean vehicle after December 31, 2023, to an eligible entity (a registered dealer) in exchange for a.financial benefit (that is, reduced final cost) from the eligible entity equal to the amount of the credit, whether in cash, in the form of a partial payment, or down payment for the purchase of such vehicle. The tax credit can be applied at the point of sale to reduce the cost of the purchase by the amount of the credit. You must report the transfer on your tax return and attach a Form 8936 and Schedule A (Form 8936) to reconcile the advance
payment of the credit and your eligibility for the credit.

Eligibility only, not liability

Repayment of credit. If you purchased a new clean vehicle from a registered dealer and reduced the amount you paid at the time of sale by transferring the credit to the dealer and you no longer qualify for the credit when you file your tax return, you must repay the amount of the credit that you transferred to the dealer.

Recapture of credit. If the vehicle no longer qualifies for the credit, you may have to recapture part or all of the credit. See Regulations section 1.30D-4.

If you still think I am in error, please explain how you would fill out the 8936/ 1040 to repay a transfered credit assuming an under the threshold MAGI and less than the credit total tax liability, say $3k.
https://www.irs.gov/forms-pubs/about-form-8936

 

[PungoteagueDave]

No, I am not. I am referring to point of sale of new clean vehicle credits.




The IRA law change added the transfer option which the IRS says (and I quoted and linked to above) does not have a clawback provision for tax liability, only income threshold (eligibility) .
Specifically 30D(g) which is separate and has it's own recapture clause

Further, Form 8936 shows in the event of transfer and meeting the income limits, the credit received isn't even recorded on one's 1040. Only if it is claimed at filing time is tax liability applied.

Transfer flow:

At time of filing flow:

Instructions

Eligibility only, not liability


If you still think I am in error, please explain how you would fill out the 8936/ 1040 to repay a transfered credit assuming an under the threshold MAGI and less than the credit total tax liability, say $3k.
https://www.irs.gov/forms-pubs/about-form-8936

Dude, you literally quote the instructions sating there is a clawback if you don’t qualify for the tax credit - when taken at point of sale. You can claim ignorance, but you could NOT be more wrong. You are literally claiming that there is a loophole that allows claiming the credit but only if taken at point of sale instead of on the tax return. Either way, you must claim it on the return, and if not allowed, either get rejected (if not taken at point of sale), or must repay it (it taken at point of sale). This isn’t nearly as hard as you try to make it.

 

[mongo]

Dude, you literally quote the instructions sating there is a clawback if you don’t qualify for the tax credit - when taken at point of sale. You can claim ignorance, but you could NOT be more wrong. You are literally claiming that there is a loophole that allows claiming the credit but only if taken at point of sale instead of on the tax return. Either way, you must claim it on the return, and if not allowed, either get rejected (if not taken at point of sale), or must repay it (it taken at point of sale). This isn’t nearly as hard as you try to make it.

The clawback is if you are not eligible for the credit, meaning your income for both the year it was put into service and previous year were over the threshold. There is no clawback if your tax liability is less than the transfered credit (what I was talking about, "that" meaning having any income/ tax liability, not refering to so much income they don't qualify)

To end up in this clawback situation one would have needed to assert they expected their income in the year it was placed in service was going to be under the MAGI limit because they would already know their income the previous year was over the threshold. Then, their income for the year placed in service would need to have exceed the threshold.

Per Form 8936, if you exceed the income cap in both years you go to line 8d which says:

Yes. Stop here. You can’t claim a clean vehicle credit for this vehicle. If line 4a is “Yes,” check the box on line 4b and report the amount from line 4a on Schedule 2 (Form 1040), line 1b.
Which is
b Repayment of new clean vehicle credit(s) transferred to a registered dealer from Schedule A (Form 8936), Part II. Attach Form 8936 and Schedule A (Form 8936)

If you do meet AGI limits: the form says:
No. If you transferred the credit amount to the dealer at the time of sale, stop here and see instructions. Otherwise, go to line 8e

Only if you didn't do a transfer do you proceed to 8e and continue to line 13
Subtract line 11 from line 9 in Part II. Stop here and include this credit amount on line 9 in Part III of Form 8936
Form 8936 lines 9-13 are the calculations to limit credit to liability. In a transfer, there is no use of this section.

 

[cybercricket]

 

[Merc_s55]

Doesn't qualify in Canada either. Not sure why they put a limit on it. EV is an EV, regardless of the price paid. I also thought I was getting lifetime free supercharging---until I sat down to do the paperwork. But---I bought it any way. Awesome vehicle. 7,000 kms and going strong. Beat up a BMW with a turbo the other day. More fun than making babies. Take care all.

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