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How will tax credit work?

Zoidz

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Biden was in favor of income limits on the EV tax credit. During Biden's campaign, I read on his **campaign web site** that he was in favor of a phased reduction of the EV tax credit as income increased. I don't remember the specifics, but I think the reduction kicked in at $150k and if you were above $270k, there was no EV tax credit at all.

HIs campaign web site is obviously taken down. I can't find any reference to this phased plan anywhere. None of the current legislation mentions it either. Personally, I think that if Biden wants to promote and accelerate the transition to EV, it should be part of a formal national energy policy, and should not have any income limits at all.

Here's the "Green Act of 2021" (don't confuse with "Green New Deal") which discusses the tax credit. It also resets the rebate on alternate energy projects (i.e. home solar) to 30% for a few years-

Here's the "Electric CARS Act of 2021" - Cars is an acronym for "Credit Access Ready at Sale". Among other things, it allows assigning the tax credit to the Lessor. https://www.merkley.senate.gov/imo/media/doc/21.02.23 Electric Cars 2021.pdf
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DucRider

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Here's the "Electric CARS Act of 2021" - Cars is an acronym for "Credit Access Ready at Sale". Among other things, it allows assigning the tax credit to the Lessor. https://www.merkley.senate.gov/imo/media/doc/21.02.23 Electric Cars 2021.pdf
The current Tax Credit already goes to the Lessor.
This revision would allow it to be assigned to any financing entity.
It also allows the credit to carryover to subsequent tax years (up to 5) so those with lower incomes can still utilize the entire credit.
 

DB-EV

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Biden was in favor of income limits on the EV tax credit. During Biden's campaign, I read on his **campaign web site** that he was in favor of a phased reduction of the EV tax credit as income increased. I don't remember the specifics, but I think the reduction kicked in at $150k and if you were above $270k, there was no EV tax credit at all.

HIs campaign web site is obviously taken down. I can't find any reference to this phased plan anywhere. None of the current legislation mentions it either. Personally, I think that if Biden wants to promote and accelerate the transition to EV, it should be part of a formal national energy policy, and should not have any income limits at all.

Here's the "Green Act of 2021" (don't confuse with "Green New Deal") which discusses the tax credit. It also resets the rebate on alternate energy projects (i.e. home solar) to 30% for a few years-

Here's the "Electric CARS Act of 2021" - Cars is an acronym for "Credit Access Ready at Sale". Among other things, it allows assigning the tax credit to the Lessor. https://www.merkley.senate.gov/imo/media/doc/21.02.23 Electric Cars 2021.pdf
Nice pull. The Green Act language does not have a change to income limits on new plug ins, but as you note, this is draft legislation.

Also interesting that at least some of it will only apply to purchase after enacted (thinking of Tesla here for their tax credit coming back to life potentially - could actually depress sales if people look at the legislation).
 

DucRider

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So, you just need Rivian to announce the pricing of the small pack version at less than 50k. It seems like some of these incentives are ripe for gaming.
Tesla has (or at lest had) just such a gamed Model 3 for Canada.
They sold it software limited to 93 miles at a price that brought it under the cap so all Model 3's are/were eligible. Owners could later pay to unlock the pack.

Rivian could offer a software limited "extra small pack" R1T/S with 100 miles of range for <$50K, then charge you the difference later to gain access to the rest of the pack.
 

thrill

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Tesla has (or at lest had) just such a gamed Model 3 for Canada. They sold it software limited to 93 miles at a price that brought it under the cap so all Model 3's are/were eligible. Owners could later pay to unlock the pack....
OK, that's brilliant gaming of senseless limitations.
 

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Blur1t

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I used to agree with that, but I've had several people tell me that small business owners may find themselves in a situation where they don't have enough MAGI to claim the full credit.
It’s what’s called a non refundable credit claimed with filing form 8936 part one and three if using for personal use. If one has taxes or liability of maximum of $7500 then you would get that towards your liability. So depending on your tax situation, filing status number of dependents claimed and adjusted gross income, you may or may not see that as cash but credit towards taxes owed like you said.
 

kyunam

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.. dumb question.

R1S will be for my family use and I get x thousands dollars as a tax refund every year.

In 2022, Will I get [$7500 + $state_EV_credit + $usual x thousands] ?

or

Do I need to owe at least [$7500 + $state_EV_credit] to both Federal and State to receive full EV credits?
 

DucRider

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.. dumb question.

R1S will be for my family use and I get x thousands dollars as a tax refund every year.

In 2022, Will I get [$7500 + $state_EV_credit + $usual x thousands] ?

or

Do I need to owe at least [$7500 + $state_EV_credit] to both Federal and State to receive full EV credits?
It's based on tax liability, not whether you get a check or send a check when you file. You may have withholding or quarterly payments towards that liability, and the Tax Credit reduces that liability by up to $7,500. It is a "non-refundable credit" (entered in Part I of Schedule 2), so your liability will never become <$0. If your liability was >$7,500 you would be able to take full advantage of the credit. If less than that, your entire tax liability would be offset. Any refund or payment due would be calculated based on the reduced tax liability.
On the 2020 1040, your tax liability is on line 16.
Worth noting that the 30% Alternative Fueling Credit (EVSE purchase/install) is also a non-refundable credit so if taken in the same year as your EV purchase would require an even greater tax liability to get the full value.

State taxes are irrelevant to the Fed Tax Credit.
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