No tax credit for customers with binding contracts.

[COdogman]

There's three scenarios here even if you read the second as having a binding contract.

Scenario 1:


Scenario 2:


Scenario 3:
If I have a binding contract to buy a vehicle before August 16, 2022, and did not purchase between August 16, 2022 and December 31, 2022, then there is no guidance for me on this page.

Since Rivian doesn't actually let you purchase a vehicle without taking delivery, I don't think there is a single person that should be worried about scenario 2.

I agree with you - it is not addressed at all which is a bit odd. Scenario 2 does lead me to believe they will simply add the “or entered into a binding purchase contract” language and be done with it.

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[SASSquatch]

The IRS has not published any guidance that will apply to the situation where someone signed a binding contract before the IRA change was implemented on whether or not those vehicles will qualify under the old rules, prior to the IRA, when purchased in the 2023 or later years.

Exactly. They haven't published guidance because it may be the case that if you take delivery in 2023 you will be claiming the credit for Tax Year 2023 which means there may not be guidance for some time.

 

[astonius]

This limbo on clear, explicit guidance has really complicated the OTD $$$ equation for our forthcoming R1S purchase. We'll be under the MSRP limit, and fingers crossed the mineral requirements either aren't in effect or qualify by the time we take delivery, but the rub is income caps.

One option my wife and I are exploring is filing separately for 2022 and using the look-back rule to qualify in 2023, but there's a risk the R1S won't qualify enough to make the difference in additional taxes worth it.

Thankfully, you can amend your return up to three years later to switch from married filing separate to married filing jointly. You cannot go the other way beyond the filing deadline, however, so my recommendation for anyone who could potentially qualify under the new rules using this approach is to file separately (or if you already did file jointly amend by 4/18/23 to separately) for now, then amend next year if it ends up not being beneficial.

 

[ls2000]

For people like myself who 1) signed a contract w/ Rivian pre 8/16/22 and 2) won't take delivery until 2024 (it seems), from my reading we should have no issue getting the $7,500 credit. Not sure if this is what some people on this thread were concerned with or not. See links below and attached PDF from US Treasury.

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.

https://www.irs.gov/credits-deductions/credits-for-new-electric-vehicles-purchased-in-2022-or-before

 

[racekarl]

For people like myself who 1) signed a contract w/ Rivian pre 8/16/22 and 2) won't take delivery until 2024 (it seems), from my reading we should have no issue getting the $7,500 credit. Not sure if this is what some people on this thread were concerned with or not. See links below and attached PDF from US Treasury.

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.

https://www.irs.gov/credits-deductions/credits-for-new-electric-vehicles-purchased-in-2022-or-before

Unfortunately, people have pointed to the following line in the pages you link along with related guidance from the IRS to cast doubt on the idea that "we should have no issue getting the $7,500 credit."

The relevant line is: "An indication of a binding contract is if a buyer has made a significant non-refundable deposit or down payment."

Below are links to IRS documents where they say that "significant" is somewhere above 5% of the contract value, so the total $1000 deposit we paid to Rivian would not be sufficient to qualify, to say nothing of the $100 part that became non-refundable.

Here is a quote from the press release which accompanied guidance re: the IRA EV credit:

"For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract."

https://www.taxequitytimes.com/wp-content/uploads/sites/15/2022/08/EV-Guidance-8-16-2022-1.pdf

 

[ls2000]

Unfortunately, people have pointed to the following line in the pages you link along with related guidance from the IRS to cast doubt on the idea that "we should have no issue getting the $7,500 credit."

The relevant line is: "An indication of a binding contract is if a buyer has made a significant non-refundable deposit or down payment."

Below are links to IRS documents where they say that "significant" is somewhere above 5% of the contract value, so the total $1000 deposit we paid to Rivian would not be sufficient to qualify, to say nothing of the $100 part that became non-refundable.

Here is a quote from the press release which accompanied guidance re: the IRA EV credit:

"For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract."

https://www.taxequitytimes.com/wp-content/uploads/sites/15/2022/08/EV-Guidance-8-16-2022-1.pdf

Thank you for sharing, even if it's not the news I wanted to hear!

 

[Critter]

There's no guidance on vehicles purchased in 2023 on this page, there never has been.

@Dark-Fx The point everyone is talking about, I think, is that back in August Rivian and Lucid and others said "Here, rush and sign this binding agreement now, to preserve your tax credit later, because we know this vehicle qualifies under pre-August 2022 rules, even though it won't under the new rules". And the IRS is saying - ok, if you actually took delivery in 2022, we'll give you that benefit of the doubt, but if you take delivery in 2023, you don't get grandfathered in and the new rules apply to you. And since the MSRP on the R1T and R1S are > $80k, no one whose Rivian is DELIVERED after 12/31/22 gets the rebate. So we're all lamenting the vehicles we signed an agreement to purchase in 22 hoping to preserve the tax benefit.

 

[Dark-Fx]

@Dark-Fx The point everyone is talking about, I think, is that back in August Rivian and Lucid and others said "Here, rush and sign this binding agreement now, to preserve your tax credit later, because we know this vehicle qualifies under pre-August 2022 rules, even though it won't under the new rules". And the IRS is saying - ok, if you actually took delivery in 2022, we'll give you that benefit of the doubt, but if you take delivery in 2023, you don't get grandfathered in and the new rules apply to you. And since the MSRP on the R1T and R1S are > $80k, no one whose Rivian is DELIVERED after 12/31/22 gets the rebate. So we're all lamenting the vehicles we signed an agreement to purchase in 22 hoping to preserve the tax benefit.

And my point is literally that the IRS is not saying anything about people who did not purchase the vehicle in 2022. This page is only concerning 2022 tax year purchases.

 

[Critter]

Unfortunately, people have pointed to the following line in the pages you link along with related guidance from the IRS to cast doubt on the idea that "we should have no issue getting the $7,500 credit."

The relevant line is: "An indication of a binding contract is if a buyer has made a significant non-refundable deposit or down payment."

Below are links to IRS documents where they say that "significant" is somewhere above 5% of the contract value, so the total $1000 deposit we paid to Rivian would not be sufficient to qualify, to say nothing of the $100 part that became non-refundable.

Here is a quote from the press release which accompanied guidance re: the IRA EV credit:

"For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract."

https://www.taxequitytimes.com/wp-content/uploads/sites/15/2022/08/EV-Guidance-8-16-2022-1.pdf

The FAQ links to the policy that contains the following:
Purchase date vs. delivery date
If you entered a written binding contract to buy a vehicle before August 16, 2022, but took possession on or after August 16, 2022, and before January 1, 2023, you may claim the credit based on the prior rules and disregard the assembly requirement.

If you purchased a vehicle between August 16, 2022 and December 31, 2022 but don't take delivery of the vehicle until 2023, see Credit for New Clean Vehicles Purchased in 2023 and After.

It may be that the official language was changed, but this clearly states that if the delivery date is after 1/1/23, the binding contract question isn't relevant. That ended up really just applying to that small group between August 16 and 12/31. I'm not a tax lawyer, but I think unfortunately it's pretty clear that all of us still waiting for deliveries are out of luck.

 

[JerseyGreens]

@Dark-Fx The point everyone is talking about, I think, is that back in August Rivian and Lucid and others said "Here, rush and sign this binding agreement now, to preserve your tax credit later, because we know this vehicle qualifies under pre-August 2022 rules, even though it won't under the new rules". And the IRS is saying - ok, if you actually took delivery in 2022, we'll give you that benefit of the doubt, but if you take delivery in 2023, you don't get grandfathered in and the new rules apply to you. And since the MSRP on the R1T and R1S are > $80k, no one whose Rivian is DELIVERED after 12/31/22 gets the rebate. So we're all lamenting the vehicles we signed an agreement to purchase in 22 hoping to preserve the tax benefit.

Your speaking in absolute statements.

In the most simplistic view - the IRS will give us 2023 tax guidance sometime in late 2022 for those of us that signed the BPAs but took delivery in 2023.

 

[racekarl]

And my point is literally that the IRS is not saying anything about people who did not purchase the vehicle in 2022. This page is only concerning 2022 tax year purchases.

It looks like whatever guidance they give for 2023 will not matter, because the agreement we signed with Rivian does not seem like it will pass muster as a "binding purchase agreement."

 

[JerseyGreens]

I understand what you're saying, but I don't think it's a stretch to imagine that if they closed the door so decisively on 2022 that they will not open it back up again for 2023.

What door did they exactly close in 2022?

People are filing for the rebate if they signed the BPA before August 16, 2022 and took delivery before January 1, 2023. That isn't any door closing.

 

[racekarl]

What door did they exactly close in 2022?

Sorry, I hit post early an was editing my post when you replied. I was meaning to say that the door that they seem to have closed is the idea that our $100 deposit will be enough to get us to qualify as a "binding purchase agreement."

 

[Dark-Fx]

I understand what you're saying, but I don't think it's a stretch to imagine that if they closed the door so decisively on 2022 that they will not open it back up again for 2023.

I don't see any doors being closed here except that the 2022 calendar year is over and this document is just here to explain everyone who qualifies to have the EV tax credit applied to their 2022 year tax returns.

This is the text of the transition rule:

(l) TRANSITION RULE.—Solely for purposes of the application of section 30D of the Internal Revenue Code of 1986, in the case of a taxpayer that—

(1) after December 31, 2021, and before the date of enactment of this Act, purchased, or entered into a written binding contract to purchase, a new qualified plug-in electric drive motor vehicle (as defined in section 30D(d)(1) of the Internal Revenue Code of 1986, as in effect on the day before the date of enactment of this Act), and

(2) placed such vehicle in service on or after the date of enactment of this Act, such taxpayer may elect (at such time, and in such form and manner, as the Secretary of the Treasury, or the Secretary’s delegate, may prescribe) to treat such vehicle as having been placed in service on the day before the date of enactment of this Act.

There is no mention of time limitation at all in the transition rule. It's not unusual for the IRS to not issue guidance on how a rule should be interpreted until well into the tax year it is supposed to apply to.

The IRS could still keep track of vehicles sold and phase out the credits based under the old rule.

 

[racekarl]

I don't see any doors being closed here except that the 2022 calendar year is over and this document is just here to explain everyone who qualifies to have the EV tax credit applied to their 2022 year tax returns.

This is the text of the transition rule:


There is no mention of time limitation at all in the transition rule. It's not unusual for the IRS to not issue guidance on how a rule should be interpreted well into the tax year it is supposed to apply to.

Same apology to you - I hit post reply instead of preview and was editing my post.

What I meant to say was that it reads to me like we won't qualify as having a "written binding contract to purchase" and that renders the rest of it moot, regardless of tax year.

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