Potential Change to $7,500 EV Tax Credit

sevengroove

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Why do it by price of vehicle? shouldn’t it be by income?? Surgeon making $1M vs contractor at $125k.
On the surface this seems like a good idea but I think it would be really difficult to implement. Using an extreme example, Bezos is worth some $100+ billion but his actual income on an annual basis is a tiny fraction of that. Or take this one - I might be retired with $5million in the bank, but only take out $50k a year. Should I still "income-qualify" for any incentives?

Vehicles become more affordable through scale. Achieving scale requires some sort of risk reduction and price sensitivity reduction. Capping incentives based on vehicle price or income does not contribute to either one of those.
I don't disagree, but we're well past that point (as @kylealden and others have mentioned) where companies need direct incentives to stand themselves up. We do however need the average car and truck buyer to nine times out of ten choose the EV option when they go car shopping, and incentivizing them directly is the only way of doing it. Price capping is a way of ensuring that the limited incentive dollars don't go to Bezos' fifteenth Model X or whatever.

The only more effect way is banning fossil gas-powered cars outright. And we know that's not happening .... yet ;).





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kylealden

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The only more effect way is banning fossil gas-powered cars outright. And we know that's not happening .... yet ;).
Well, a carbon tax (to consumers and/or OEMs) would be another approach, but a pretty distasteful one, at least until there are more competitive entry-level EV options.
 

sevengroove

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Well, a carbon tax (to consumers and/or OEMs) would be another approach, but a pretty distasteful one, at least until there are more competitive entry-level EV options.
Exactly, for either approach we have to make sure lower- and middle-wage earners actually have an affordable way of complying before mandating and penalizing.
 

DucRider

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Do we know if there's an income limit on the rebate?
1) It is not a rebate, it is a tax credit
2) Since it is a tax credit, there is a minimum income level to fully qualify (but no maximum)

If they raise the amount of the tax credit, the amount of income required to get the full credit will increase as well (unless they change the type of tax credit provided). Kind of contrary to the purpose of the proposed $80K cap.
 

Mjhirsch78

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Emailed my senators and representative.

Another thing being overlooked: only the highest earners see the full benefit even before this arbitrary limit. If your family makes $60k, you won’t see anywhere near the full incentive, regardless of the car you buy. This essentially incentivizes wealthy folks to buy low-mid cost EVs.
 

sevengroove

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Emailed my senators and representative.

Another thing being overlooked: only the highest earners see the full benefit even before this arbitrary limit. If your family makes $60k, you won’t see anywhere near the full incentive, regardless of the car you buy. This essentially incentivizes wealthy folks to buy low-mid cost EVs.
Great point.
 

jimcgov3

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I've never really liked that removable options are considered part of MSRP since the cost of registration is based on the MSRP value of the vehicle. If I get the Camp Kitchen it's going to cost me an extra $38 a year in registration.
100%. This BS FTC bill should be based on MSRP of the vehicle before accessories. None of these accessories are permanent or require the factory(union or non-union) to install them.
 

Ty012

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Unless it is changing in the new bill, the $7500 federal tax credit is a NON-refundable credit.

Edit: My explanation below is incorrect. Others have explained it better. I’ll leave the post as is below for context.

For those that don’t knowwhat that means, I’ll try to explain:
As a non-refundable credit, it will bring your tax bill down $7500. For example if owe $7500 to the IRS, you owe zero after the credit. If you owe $5000, you owe zero after the credit but you do NOT get a $2500 refund. If you get a $1000 federal refund you see zero of the federal $7500 credit. For that matter if you got a $1 refund, you would still see zero of $7500 federal tax credit. Because I usually get a federal refund each year I saw zero of the available ($3250 I think at the time for a a Tesla) federal tax credit when I bought my Tesla in 2019 and will likely see zero again when buying the Rivian, unless I owe that year.

However, some states offer refundable credits that will allow the full or adjusted amount to be refunded with your state tax refund. In CO I got a check for 5k on top of my state refund for my 2019 Tesla and currently would get an extra $2500 from the state of CO for a new EV. I think there may even be some states that will send you a check after purchase so you don’t have to wait to file your taxes.

There is more as well with regards to lease vs purchase or Plug-in vs full EV but those don’t apply with a Rivian atm.
 
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DucRider

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For that matter if you got a $1 refund, you would still see zero of $7500 federal tax credit. Because I usually get a federal refund each year I saw zero of the available ($3250 I think at the time for a a Tesla) federal tax credit when I bought my Tesla in 2019 and will likely see zero again when buying the Rivian, unless I owe that year.
This is 100% wrong.

The credit availability is not impacted by whether a refund (or payment) would be due. The only relevant number is your tax liability. If you had $10K in withholding and your tax liability was $9,999 without an EV purchase, this would result in a $1 refund. But, if you purchased a Rivian that year, the $7,500 would reduce the tax owed from $9,999 to $2,499 and you would get a refund of $7,501
 

timesinks

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Unless it is changing in the new bill, the $7500 federal tax credit is a NON-refundable credit.

For those that don’t knowwhat that means, I’ll try to explain:
As a non-refundable credit, it will bring your tax bill down $7500. For example if owe $7500 to the IRS, you owe zero after the credit. If you owe $5000, you owe zero after the credit but you do NOT get a $2500 refund. If you get a $1000 federal refund you see zero of the federal $7500 credit. For that matter if you got a $1 refund, you would still see zero of $7500 federal tax credit. Because I usually get a federal refund each year I saw zero of the available ($3250 I think at the time for a a Tesla) federal tax credit when I bought my Tesla in 2019 and will likely see zero again when buying the Rivian, unless I owe that year.

However, some states offer refundable credits that will allow the full or adjusted amount to be refunded with your state tax refund. In CO I got a check for 5k on top of my state refund for my 2019 Tesla and currently would get an extra $2500 from the state of CO for a new EV. I think there may even be some states that will send you a check after purchase so you don’t have to wait to file your taxes.

There is more as well with regards to lease vs purchase or Plug-in vs full EV but those don’t apply with a Rivian atm.
I've always been interested in tax, so it's always surprised me how many people misunderstand some of the basic mechanics of our system. I moonlight as a tax pro (with an EA license), so please understand this: It would be very uncommon for a non-retired person who can afford a Rivian to not be able to take advantage of the full credit.

Go pull out your 2020 1040. The credit gets applied against your "Tax" (line 16). Whatever dollar amount you have on line 22 (this line is tax less credits) is tax that can be offset by non-refundable credits.

The difference between a "refundable" and a "non-refundable" credit is whether it can reduce your tax below $0. Said another way, a "non-refundable" credit can still be used to get tax you had withheld refunded to you, but a "refundable" credit can have dollars you never paid in refunded to you. I agree that the terminology is confusing af, but, again, if you are working and can afford these vehicles, you probably pay enough federal income tax to get the full benefit of these credits.
 

Ty012

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This is 100% wrong.

The credit availability is not impacted by whether a refund (or payment) would be due. The only relevant number is your tax liability. If you had $10K in withholding and your tax liability was $9,999 without an EV purchase, this would result in a $1 refund. But, if you purchased a Rivian that year, the $7,500 would reduce the tax owed from $9,999 to $2,499 and you would get a refund of $7,501
You are correct. My understanding of it was wrong. Tax liability is different than tax owed which is where my mistake was. Sorry for the misinformation but I’m glad it started this part of the discussion as the $7500 is not always money in the bank for everyone the same way a refundable credit is. I also edited my original post with a note that it is incorrect.

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EVSport7

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"The elimination of the per-manufacturer-cap is effective for vehicles sold after May 24, 2021. The portions of the proposal making the EV credit a refundable personal income tax credit along with the VIN requirement are effective for vehicles acquired after December 31, 2021"

Stole this from the discussion on the Ford forums. He's saying it will change to refundable
 

SANZC02

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"The elimination of the per-manufacturer-cap is effective for vehicles sold after May 24, 2021. The portions of the proposal making the EV credit a refundable personal income tax credit along with the VIN requirement are effective for vehicles acquired after December 31, 2021"

Stole this from the discussion on the Ford forums. He's saying it will change to refundable
That is one change being proposed as well as others.

We need to keep in mind these are all proposals and works in progress so I would refrain from making decisions on any of this until it is actually a signed bill. It could just all die on someone’s desk.
 

EVSport7

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That is one change being proposed as well as others.

We need to keep in mind these are all proposals and works in progress so I would refrain from making decisions on any of this until it is actually a signed bill. It could just all die on someone’s desk.
Oh I fully agree, but would be a welcome change if it goes through this way for those without enough tax liability to use the whole credit
 

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