2022 vs 2023 Tax credit…Again

[mabowden]

Sorry for those who were close but didn't get it in 2022. Glad I secured the tax credit. It by no means breaks the bank, but damn it is nice to have!

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[freshpow]

It is the MSRP+options+accessories (but not including destination or registration fees) of your specific vehicle.

Which means yes, if you are grandfathered in to the old pricing, you can get more options and still be under the $80k; while a post-price-increase vehicle you can bump over $80k based solely on exterior color.

Note that the IRS seems to have declared that the "Binding Purchase Agreement signed before the IRA went into effect" only applies to 2022 deliveries. The relevant page on the IRS' website mentions the BPA for 2022 deliveries, but says for Jan 1 2023 or later deliveries to see the 2023 page - and the 2023 page says absolutely nothing about BPAs.

My hypothesis here (attempting to stay hopeful, but planning for the worst) is that of course they haven't issued guidance for tax year 2023 yet. They just issued this guidance for 2022, since we're just about to enter tax filing season so it makes sense that they would only comment up to end of the current tax year. They will issue similar guidance around the same time next year, and it may very well rule that the BPAs are useless, but I don't think the fact that they didn't include it yet is indicative of whether or not BPAs will count for 2023 (or beyond) deliveries.

Q: If I signed a contract to purchase an electric vehicle prior to enactment of the Inflation Reduction Act (before August 16, 2022) but have not yet taken possession of the vehicle, will the changes in the Inflation Reduction Act impact my tax credit?

No. If you entered into a written binding contract to purchase a qualifying electric vehicle before the date of enactment of the Inflation Reduction Act (August 16, 2022), the changes in the Inflation Reduction Act will not impact your tax credit. You may claim the credit based on the rules that were in effect before August 16, 2022. The Internal Revenue Service provides information on “written binding contract” here: https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d.

Source: Frequently Asked Questions on the Inflation Reduction Act’s Initial Changes to the Electric Vehicle Tax Credit (treasury.gov)

 

[Monkey]

They meet to finalize the tax code changes in April. The only thing that's still being decided apparently is the battery materials sourcing. Of course, they could change just about any of it still as it's not final until the IRS says it is.

As @freshpow pointed out, the language to support the BPA's is still there. For this to work, you need the signed agreement with Rivian where they took the $5000 deposit. So those just sitting on a configuration in their account and the $1000 initial deposit are not going to be eligible.

 

[norivian]

I think if you take delivery in Jan to March of 2023, the only two new tax credit rules that applies are , MSRP cap and being Assembled in USA which Rivian R1T can qualify for (excluding income limits). The question is, do IRS care about what MSRP is on your purchase agreement, or they would go with Rivian new MSRP in 2023 which is already increased since March of 2022 regardless? Since the value of the car is at the new MSRP meaning car now worth more?

Hopefully it’s whatever you paid for your vehicle.

 

[kentma]

It is the MSRP+options+accessories (but not including destination or registration fees) of your specific vehicle.

Which means yes, if you are grandfathered in to the old pricing, you can get more options and still be under the $80k; while a post-price-increase vehicle you can bump over $80k based solely on exterior color.

Note that the IRS seems to have declared that the "Binding Purchase Agreement signed before the IRA went into effect" only applies to 2022 deliveries. The relevant page on the IRS' website mentions the BPA for 2022 deliveries, but says for Jan 1 2023 or later deliveries to see the 2023 page - and the 2023 page says absolutely nothing about BPAs.

unfortunately, we may not qualify for 2023 tax credit based on pre march 2022 price without binding agreement, in this link: https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after
MSRP is the retail price of the automobile suggested by the manufacturer, including options, accessories and trim but excluding destination fees. It isn't necessarily the price you pay.

 

[JerseyGreens]

They meet to finalize the tax code changes in April. The only thing that's still being decided apparently is the battery materials sourcing. Of course, they could change just about any of it still as it's not final until the IRS says it is.

As @freshpow pointed out, the language to support the BPA's is still there. For this to work, you need the signed agreement with Rivian where they took the $5000 deposit. So those just sitting on a configuration in their account and the $1000 initial deposit are not going to be eligible.

When was Rivian ever taking 5k deposits?

I think you are going into what States consider a binding contract and each are different.

 

[NashvilleR1S]

Q: If I signed a contract to purchase an electric vehicle prior to enactment of the Inflation Reduction Act (before August 16, 2022) but have not yet taken possession of the vehicle, will the changes in the Inflation Reduction Act impact my tax credit?

No. If you entered into a written binding contract to purchase a qualifying electric vehicle before the date of enactment of the Inflation Reduction Act (August 16, 2022), the changes in the Inflation Reduction Act will not impact your tax credit. You may claim the credit based on the rules that were in effect before August 16, 2022. The Internal Revenue Service provides information on “written binding contract” here: https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d.

Source: Frequently Asked Questions on the Inflation Reduction Act’s Initial Changes to the Electric Vehicle Tax Credit (treasury.gov)

*Edit to include my CPA's notes*
Sadly that info has changed. That treasury page was from aug 16, 2022. CPA's thought's below:

"This has been changed since it was first proposed. The issue that you are running into is that you entered into a binding contract in 2022 but will not take possession of the vehicle until 2023, and for this reason, you are subject to the AGI and MSRP limits"

 

[freshpow]

*Edit to include my CPA's notes*
Sadly that info has changed. That treasury page was from aug 16, 2022. CPA's thought's below:

"This has been changed since it was first proposed. The issue that you are running into is that you entered into a binding contract in 2022 but will not take possession of the vehicle until 2023, and for this reason, you are subject to the AGI and MSRP limits"

You should probably find a new CPA. He or she may end up being right, but the IRS has not published clear guidance anywhere on what happens to BPAs signed before 8/16/22 that take delivery in 2023 and beyond.

If we assume that the IRS will count Rivian's BPAs as valid written binding contracts (they very well may not), I think there is a legal case to be made (not a lawyer) based on the guidance that was published prior to 8/16/22.

" If you entered into a written binding contract to purchase a qualifying electric vehicle before the date of enactment of the Inflation Reduction Act (August 16, 2022), the changes in the Inflation Reduction Act will not impact your tax credit. You may claim the credit based on the rules that were in effect before August 16, 2022."

You could easily argue that you would not have entered into a written binding contract with Rivian had this guidance not been published, so I don't think it's something they can just change after the fact.

 

[Jac]

Since I consider it highly unlikely the BPA will work for 2023 deliveries, I tweaked my configuration to squeak under $80,000 to see how that affects my late January quarterly delivery update.

If we find out in coming months that Rivian won’t be eligible for even half the $7500 EV credit under the battery mineral/component sourcing test my plan is to revert to my over $80,000 configuration.

YMMV.

 

[CharonPDX]

unfortunately, we may not qualify for 2023 tax credit based on pre march 2022 price without binding agreement, in this link: https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after
MSRP is the retail price of the automobile suggested by the manufacturer, including options, accessories and trim but excluding destination fees. It isn't necessarily the price you pay.

It isn't the price you pay, but it is the MSRP +options+accessories on your window sticker.

Here's someone's sticker:

You can see this window sticker is *JUST* under - $79,000 before destination charges. What if you signed the contract to buy, got your window sticker assigned, scheduled to pick up the vehicle in two days; and in the day in between the manufacturer raises the price by $1005? You'd be screwed.

As a counter-example, here's a window sticker with a *discount* shown, then the extra "dealer add-ons" bit on the side:

In both these cases, all that matters is the main window sticker's "Total vehicle & options" price. In this example, if the cutoff were $40,000 even, this buyer would be in trouble, as the "before destination charge" is $40,700. Even though it has a $750 discount that would have made it $39,950 before destination charge. Conversely, if they limit were $41,000, they'd be fine, since $40,700 is under that, even with the extra dealer bits to the right.

And so much is variable in many vehicles, the IRS has no way of knowing your precise vehicle's exact configuration pricing easily. They have to go by the required-by-law window sticker's "Total vehicle & options" as the authoritative price. (Which isn't allowed to be modified by the dealer, hence why the dealer add-ons extra paper exists. Although some dealers do put their add-ons/markups below "TOTAL VEHICLE PRICE" on the main sticker - that is illegal. That is the whole point of the Monroney label - to avoid dealer's hiding markup. If they want to mark up a vehicle, they have to use an extra piece of paper.

 

[kentma]

Since I consider it highly unlikely the BPA will work for 2023 deliveries, I tweaked my configuration to squeak under $80,000 to see how that affects my late January quarterly delivery update.

If we find out in coming months that Rivian won’t be eligible for even half the $7500 EV credit under the battery mineral/component sourcing test my plan is to revert to my over $80,000 configuration.

YMMV.

if you take delivery before March 2023 , the battery material requirement may not be considered, I did not sign BPA with Rivian and I reserved R1T before march 2022 with a price being around 72K
My worry is IRS would not care what I purchase for, and only care about the current MSRP pricing,
as you know quade motor adds $8000 and the Large battery which is the only available config at that time adds to the current base price by $6000, added $14000 to $73000 adventure package. so this will take you above 80,000 no matter what.
My dilemma is when you don't have any BPA of any kind and taking delivery in Jan 2023 with pre March 2022 MSRP pricing ($72,000) which price IRS considers, looks like they will consider 2023 price increase on Rivian cars no matter what, please let me know if I am wrong.

 

[SANZC02]

It isn't the price you pay, but it is the MSRP +options+accessories on your window sticker.

Here's someone's sticker:

You can see this window sticker is *JUST* under - $79,000 before destination charges. What if you signed the contract to buy, got your window sticker assigned, scheduled to pick up the vehicle in two days; and in the day in between the manufacturer raises the price by $1005? You'd be screwed.

As a counter-example, here's a window sticker with a *discount* shown, then the extra "dealer add-ons" bit on the side:

In both these cases, all that matters is the main window sticker's "Total vehicle & options" price. In this example, if the cutoff were $40,000 even, this buyer would be in trouble, as the "before destination charge" is $40,700. Even though it has a $750 discount that would have made it $39,950 before destination charge. Conversely, if they limit were $41,000, they'd be fine, since $40,700 is under that, even with the extra dealer bits to the right.

And so much is variable in many vehicles, the IRS has no way of knowing your precise vehicle's exact configuration pricing easily. They have to go by the required-by-law window sticker's "Total vehicle & options" as the authoritative price. (Which isn't allowed to be modified by the dealer, hence why the dealer add-ons extra paper exists. Although some dealers do put their add-ons/markups below "TOTAL VEHICLE PRICE" on the main sticker - that is illegal. That is the whole point of the Monroney label - to avoid dealer's hiding markup. If they want to mark up a vehicle, they have to use an extra piece of paper.

The destination charge is deducted from the total, it is not part of the calculation. In the Rivian sticker above, the subtotal line of 79k is the number you would use.

 

[CharonPDX]

The destination charge is deducted from the total, it is not part of the calculation. In the Rivian sticker above, the subtotal line of 79k is the number you would use.

Which is what I said.

 

[Prime]

Won’t the window sticker be the same as what is shown in the configurator plus destination? It’s not like the window sticker will show post march pricing for pre march order holders correct?

 

[SANZC02]

Won’t the window sticker be the same as what is shown in the configurator plus destination? It’s not like the window sticker will show post march pricing for pre march order holders correct?

No the sticker will show your pre March pricing.

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