Proposed Bill To Give Electric Vehicle Buyers $7,500 Credit Right When They Buy

[Tommy]

U.S. Sen. Debbie Stabenow unveiled a legislative proposal on Monday that would give buyers of plug-in electric vehicles up to a $7,500 rebate at the point of purchase.

http://inhabitat.com/proposed-bill-t...when-they-buy/

[TEG]

Yep, big news.
Mentioned here before too:
http://www.teslamotorsclub.com/showt...ll=1#post58149

So, when does it happen?
Does it make possible customers wait for it to happen?

[ChargeIt!]

Yep, big news.

So, when does it happen?
Does it make possible customers wait for it to happen?

Yes ... I think so. Possibly many LEAF reservationists with near-term deliveries will consider delaying delivery to get the rebate (rather than the credit). Same with Tesla Roadster owners-to-be ... just IMHO ( hate these emoticons! I mean )

[Tommy]

So, when does it happen?
Does it make possible customers wait for it to happen?

The devil is in the details.

As the law is written now, the $7,500 credit for a Tesla is a credit to offset your tax liability; those with less than a $7,500 tax liability would receive correspondingly less credit and indeed may wait to see how the new changes affect them.

How Congress implements a $7,500 rebate at the point of sale WITHOUT getting Tesla (or other dealer) to verify your tax liability is one Houdini of a trick. My hope is that the credit becomes $7,500 regardless of tax liability. Now that would open up a lot more people to purchasing an EV.

I understand the credit is also formulated on battery size, with $7,500 being the max which Tesla qualifies for.

[PopSmith]

In my opinion, this idea is catering to the "I need it now" generation. To be totally honest I don't like the idea of giving the credit as a part of the purchase because it's worth much more as a tax credit, I believe most people just don't realize this.

Example: For a single (not married) to pay $7,500 in taxes (in 2011) they'd need to earn $40,900; earning up to that amount means they'd pay no taxes as a result of the credit.

http://www.moneychimp.com/features/tax_brackets.htm

[Tommy]

I understand what your saying PopSmith, however EV's currently command a premium price and a lot of folks simply cannot afford to roll the higher price (the premium) into a loan or do not have the extra down payment to have affordable payments. GM, with the volt, is trying a 0% percent loan on the $7,500 until the purchaser gets their tax refund, however from the posts I've read on the GM-Volt site, not much success with that program.

So, if the instant rebate at time of purchase gets more people behind the wheel of an EV is that a bad idea?

[TEG]

I don't like the idea of giving the credit as a part of the purchase because it's worth much more as a tax credit, I believe most people just don't realize this.

I guess I fall into the "most people" category then. How is it worth much more as a tax credit? Isn't it the same $7500 back to you if you get it up front as apposed to getting it as a reduction in your tax liability when you file in the following year? I can see how it would be worth a bit more if they taxed the point-of-sale rebate/credit as income, but otherwise it seems like the same amount either way.

What am I missing? Please elaborate.

[ckessel]

What am I missing? Please elaborate.

Ditto. I'm baffled as well. How is a tax credit going to be worth more than what's effectively a $7500 instant rebate?

[Todd Burch]

I guess I fall into the "most people" category then. How is it worth much more as a tax credit? Isn't it the same $7500 back to you if you get it up front as apposed to getting it as a reduction in your tax liability when you file in the following year? I can see how it would be worth a bit more if they taxed the point-of-sale rebate/credit as income, but otherwise it seems like the same amount either way.

What am I missing? Please elaborate.

I guess I'm in that boat too...I don't see the difference. I also wouldn't expect many folks with a $41k income to be buying $40K-80K cars. If anything, by getting an instant rebate I can invest that rebate and make interest or capital gains with it. I'm pretty sure the $7500 rebate would not be considered income and therefore would not be taxable...but I'm no CPA...

[PopSmith]

OK, obviously I need to explain a bit futher.

I understand that someone earning $41k/year probably isn't going to buy a Model S. I used that example because the $7,500 rebate would result in them paying zero income tax (due to it being a tax credit).

As a better example let's say a couple, filing jointly, is paying taxes on $250,000 in 2011:

($17,000 minus 0) x 10% : $1700
($69,000 minus $17,000) x 15% : $7,800
($139,350 minus $69,000) x 25% : $17,587.50
($250,000 minus $139,350) x 28% : $30,982

Total: $58069.50

After the tax credit they pay $50,569.50. In order for this imaginary couple to pay that amount in taxes without a tax credit they would have to earn $223,215:

($17,000 minus 0) x 10% : $1700
($69,000 minus $17,000) x 15% : $7,800
($139,350 minus $69,000) x 25% : $17,587.50
($223,215 minus $139,350) x 28% : $23,482.20
Total: $50569.70

This means that a couple earning $250,000 is essentially getting $26,785 in income tax-free by using the $7,500 rebate, that's 357% more than the "face value" of the rebate.

I hope that helps clarify my position a bit.