Hold off on accepting binding agreement with Rivian till House of Representative approves bill

[SANZC02]

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I -believe- the new law (if you qualify) that the gov’t writes you a check for $7500 regardless of your tax burden, and I think it might happen at point of sale (or near it) vs. waiting until you file.

Has that been confirmed, there was discussion about making the change to a refundable tax credit but I have not seen where that made the bill that passed. I thought it was still a nonrefundable credit.

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[mikehmb]

Has that been confirmed, there was discussion about making the change to a refundable tax credit but I have not seen where that made the bill that passed. I thought it was still a nonrefundable credit.

I’m definitely not 100% sure. An earlier version of the bill, before the income limits were re-introduced, was this way. But the final version is a head-scratcher for me right now. Will be calling our accountant when the 8-steps start just to be sure.

 

[rohobono]

I’m definitely not 100% sure. An earlier version of the bill, before the income limits were re-introduced, was this way. But the final version is a head-scratcher for me right now. Will be calling our accountant when the 8-steps start just to be sure.

From what I understand the new credit is the same credit as the old one, the IRA mainly just changes the rules around what qualifies. So you would still need a minimum federal tax liability of 7500 to get the full benefit. The new rules will allow dealerships to apply the credit at point of sale(starting in 2024) but it will be on the purchaser to know their own tax situation. So if you get the credit at the point of sale and end up not having enough of a tax burden for the full credit you'll owe the IRS the difference when you do your taxes.

 

[Dark-Fx]

The Tax Credit under current law is effectively a rebate against your tax burden. For example, if you owe/pay 10k in taxes in a year, and are eligible for the 7500 credit, then your net tax burden reduces to $2500. That means if you are paying all taxes in the tax year in total, and not a penny more (and not when you file your return), then you get a check for $7500.

If you defer all your tax payments until when you file, and say you would otherwise owe $10,000, you would reduce that by $7500, resulting in a net check you write the IRS for $2500.

If you owe/pay zero taxes, it doesn’t do you any good.

I -believe- the new law (if you qualify) that the gov’t writes you a check for $7500 regardless of your tax burden, and I think it might happen at point of sale (or near it) vs. waiting until you file.

If you owe at the end of the year with the credit, you could face underpayment penalties.

 

[GrayFox]

So question then if I sign, (apologies if basic, not a tax expert):

2022 Taxes are due to be filed by April 2023. If my R1T delivery and respective payment are after that date (stated 1H23), how do I claim my $7,500? In 2023 tax filing?

Or, do I take the tax credit in April 2023 for the 2022 filing for only the $100 deposit? That would seem strange to me, especially if I were to take it and then cancel my R1T order, do I then gain $7,400?

 

[mikehmb]

If you owe at the end of the year with the credit, you could face underpayment penalties.

Oh yeah for sure. I’m ignoring a shirt-ton of detail here to simplify the response. Penalties, interest, etc are not in that equation.

 

[TexasBob]

Has that been confirmed, there was discussion about making the change to a refundable tax credit but I have not seen where that made the bill that passed. I thought it was still a nonrefundable credit.

It is not refundable but understand what "refundable" means... This is a NON-REFUNDABLE credit example:
Lets say you have $10,000 in withholding through the year.
You do your taxes without the credit and you are due a refund of $1,000
(so your total tax burden was $9,000 which you have already paid through your withholdings)
Then you add your credit and you are due a refund of $8,500, which is what you will get.

A refundable credit would be this:
You have withholdings of $10,000
You do your taxes without the credit and you are due a refund of $5,000
(so your total tax burden was $5,000 which you have already paid through your withholdings)
in the current NON-REFUNDABLE tax credit you add your EV credit and you are due a refund of $5,000 because you can never get more than 100% of your total tax burden.
If it were REFUNDABLE you would get the full $7,500 (in other words you total tax burden for that year would be a negative $2,500)

The credit is non-refundable which means you cannot get more than your total tax burden, but you can absolutely have an extra $7,500 refund check if your withholding was high enough to cover your tax burden. Hope that helps.

 

[TexasBob]

So question then if I sign, (apologies if basic, not a tax expert):

2022 Taxes are due to be filed by April 2023. If my R1T delivery and respective payment are after that date (stated 1H23), how do I claim my $7,500? In 2023 tax filing?

Or, do I take the tax credit in April 2023 for the 2022 filing for only the $100 deposit? That would seem strange to me, especially if I were to take it and then cancel my R1T order, do I then gain $7,400?

You can file an amended return when the vehicle arrives (1040X) or, if you are expecting the vehicle before September, you can just file an extension.

 

[TexasBob]

I'm still very confused on why the $7,500 tax credit is still such a huge deal? Please correct me if I'm wrong, but the tax credit is not $7,500 given to you when you file your tax return. My understanding is its just a $7,500 deductible essentially. Don't get me wrong, every little bit helps, bit it doesn't seem like it should be THAT important to a lot of people on whether they'd still buy a Rivian. For Rivian's success, I hope the BPAs help. I took delivery in early August, but wasn't concerned about the tax credit. I just wanted my vehicle as soon as possible after pre-ordering in March 2020.

Dollar-for-dollar reduction on taxes paid. $7,500 tax credit = $7,500 in your pocket at least so long as you have a total tax owed of $7,500 or more (check line 24 on your last 1040).

 

[SANZC02]

It is not refundable but understand what "refundable" means... This is a NON-REFUNDABLE credit example:
Lets say you have $10,000 in withholding through the year.
You do your taxes without the credit and you are due a refund of $1,000
(so your total tax burden was $9,000 which you have already paid through your withholdings)
Then you add your credit and you are due a refund of $8,500, which is what you will get.

A refundable credit would be this:
You have withholdings of $10,000
You do your taxes without the credit and you are due a refund of $5,000
(so your total tax burden was $5,000 which you have already paid through your withholdings)
in the current NON-REFUNDABLE tax credit you add your EV credit and you are due a refund of $5,000 because you can never get more than 100% of your total tax burden.
If it were REFUNDABLE you would get the full $7,500 (in other words you total tax burden for that year would be a negative $2,500)

The credit is non-refundable which means you cannot get more than your total tax burden, but you can absolutely have an extra $7,500 refund check if your withholding was higher enough to cover your tax burden. Hope that helps.

I understand the difference, he was describing a refundable tax credit which there was talk last year about changing the EV credit to a refundable credit in one of the iterations of the bill but I did not see that in what was in the latest bill. Thus my question to him about if he saw something I was missing in the latest version.

 

[TexasBob]

I understand the difference, he was describing a refundable tax credit which there was talk last year about changing the EV credit to a refundable credit in one of the iterations of the bill but I did not see that in what was in the latest bill. Thus my question to him about if he saw something I was missing in the latest version.

Sorry. Misunderstood your post. Many people get the terms confused.

 

[Scrambler]

Please correct me if I'm wrong, but the tax credit is not $7,500 given to you when you file your tax return. My understanding is its just a $7,500 deductible essentially.

It's not a deduction, it's a credit. If you have sufficient tax liability, it is $7,500 in your pocket.

 

[Sgt Beavis]

You’ve got until tomorrow to sign the purchase agreement.
https://electrek.co/2022/08/15/bide...-reduction-act-tomorrow-affecting-ev-credits/

 

[Friscorays]

You’ve got until tomorrow to sign the purchase agreement.
https://electrek.co/2022/08/15/bide...-reduction-act-tomorrow-affecting-ev-credits/

Actually today.
"But the bill has a “transition rule” which means that buyers signing a binding purchase agreement can retain access to the “old” EV tax credit by signing a binding purchase agreement the day before the law is signed. As we’ve just learned, since the bill will be signed tomorrow, that means the last chance to get the “old” EV tax credit is to sign a binding purchase agreement today."

 

[ToadStool]

Random question and pardon my ignorance but my wife and I have both and R1S and R1T on order (2020/2021 orders) and I have a Silverado EV order in. Joint filing, one income. Can’t find much about the new or existing tax law regarding purchasing multiple EVs. Assume all will arrive in 2023, possibly one in 2024. Thanks so much.

Based on my limited research, you are allowed to claim one EV tax rebate and your spouse is also able to claim one EV tax credit in same year and at least until tomorrow, you could purchase a new EV every year. IOW, no limit to how many years you participate in an EV purchase.

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