$7500 IRA business tax credit

[bayareaever]

Tesla recently started listing a $7500 tax credit for businesses on the S/X order page. I think it’s part of the IRA- apparently it doesn’t have any limits on AGI or car price. It is separate from the longstanding section 179 deduction for MX and presumably cannot be used in conjunction.

Sounds easy enough for anyone who owns their own business but the IRS website is lacking details. Anyone know any more details?

 

[ATPMSD]

Is this what you are looking for:

Commercial Clean Vehicle Credit | Internal Revenue Service

Businesses and tax-exempt organizations that buy electric vehicles and mobile machinery may qualify for clean vehicle tax credits up to $40,000.

www.irs.gov

 

[bayareaever]

Is this what you are looking for:

Commercial Clean Vehicle Credit | Internal Revenue Service

Businesses and tax-exempt organizations that buy electric vehicles and mobile machinery may qualify for clean vehicle tax credits up to $40,000.

www.irs.gov

Yes but it’s lacking some details like does any business qualify?, does the car have to be used for the business?

Also the car is in my name but it’s my wife’s business but we file together. Not sure if the irs would care.

 

[ATPMSD]

Yes but it’s lacking some details like does any business qualify?, does the car have to be used for the business?

Also the car is in my name but it’s my wife’s business but we file together. Not sure if the irs would care.

I suggest you ask your accountant.

 

[Ampster]

i bought a Model X seven years ago in a business and we took accelerated depreciation back then. It was for any vehicle over 6000 lbs. I don't know if it stll applies today.

 

[MacO512]

Yes but it’s lacking some details like does any business qualify?, does the car have to be used for the business?

Also the car is in my name but it’s my wife’s business but we file together. Not sure if the irs would care.

Generally only the business use would qualify, so if it was 20% business use 80% personal use you'd only get 20% of the credit. There also might be other limits like it has to be over 50% business use. I'd title it ideally in the name of the business. I don't think you could title individually - maybe if it was schedule C sole proprietor business. If your not an owner of the business I don't see how you would be able to claim the credit. If reviewed they will look at the name on the bill of sale as it has to be bought new; whereas if it was just depreciation and not the new tax credit you could probably write up a bill of sale from individual to business. Also could have an issue with your insurance as you need to let them know the business use and that could raise your rates. I'm a CPA but havent practiced tax in a long time so others may know much more.

 

[Jewel]

There are income limitations, even for the business credit, the same as the individual Modified AGI caps.

https://www.irs.gov/pub/taxpros/fs-2023-08.pdf

"
Q1. Could my income level prevent me from taking the new clean vehicle credit? (updated March 31, 2023)
A1. Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:

• Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000
• Head of household - $225,000
• All other taxpayers - $150,000
  Your modified AGI is the amount from line 11 of your Form 1040 plus:
• Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
• Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
  If your filing status changes between the preceding year and the current year, you may claim the new clean vehicle credit if your modified AGI is at or
  below the threshold in the preceding year or current year based on applicable filing status for that year.
  

 

[ATPMSD]

There are income limitations, even for the business credit, the same as the individual Modified AGI caps.

Pretty sure this statement is incorrect. Anyone doing this should ask their Tax Accountant,

 

[Jewel]

Pretty sure this statement is incorrect. Anyone doing this should ask their Tax Accountant,

I would LOVE to be incorrect. I’m hoping that’s so. The info and link I posted is from the irs FAQ re the business tax credit. I have no knowledge and limited understanding of the tax language—would love to be wrong.

Still waiting for my tax guy to get back to me about it. That and Section 179–so any info you have is much appreciated!

 

[ATPMSD]

I would LOVE to be incorrect. I’m hoping that’s so. The info and link I posted is from the irs FAQ re the business tax credit. I have no knowledge and limited understanding of the tax language—would love to be wrong.

Still waiting for my tax guy to get back to me about it. That and Section 179–so any info you have is much appreciated!

One of the statements refers to not be allowed to combine credits and that is where I think it refers to the personal limits. If you think about it, a business does not have a personal AGI, it is business income, so how would the limits be applied?

Anything is possible when it comes to taxes of course, which is why such questions are best deferred to a business accountant, which you appear to be doing. Good luck!

 

[MacO512]

Perhaps the income limits are the same if its a business credit but the credit is passed through to the individuals 1040 tax return. So if your business is schedule C, S Corp or partnership. There might not be a limit on the business return but could be once it flows into your personal return. None of those structures directly pay tax, the income flows to the individual and the individual pay tax.

If the business was a C Corp it has a stand alone tax return so none of those AGI limits apply. C Corps don't have AGI.

I don't know precisely how the EV credit works for business though, just in other tax situations I've seen credits/deductions treated that way.

The other possibility would be theres just much higher limits or even no limit for any business claiming the credit, thus the Q&A above only applies to the nonbusiness credit.

 

[MortonGarrett]

Pretty sure this statement is incorrect. Anyone doing this should ask their Tax Accountant,

This is incorrect. There is no business income limit. Here is a link to the IRS website on taking the credit for business Commercial Clean Vehicle Credit | Internal Revenue Service

 

[Jewel]

Anyone followed up with their cpa and heard more definitive answer on Income restrictions for business?

 

[bayareaever]

Anyone followed up with their cpa and heard more definitive answer on Income restrictions for business?

The irs website says details are pending so I don’t know how a cpa would know anything more at this point, at least I know mine wouldn’t. Hopefully someone’s would know more than mine though.

 

[toology]

IRS FS-2023-08 is very confusing, it mixes individual tax and commercial credits and makes things even harder to figure out. I bet the IRS itself will give you 2 different answers if you ask them.

After reading FS-2023-08 my CPA said "Yes, it looks to me the $80k cap applies. If you look at Topic B, Questions 1 and 2, it appears to me you and the other owners will not receive the credit because your AGI’s will be above $300k."

However I don't know if FS-2023-08 is correct because I don't want to claim it as a individual but has a company:

Q2. How do the income thresholds apply to my partnership’s purchase and use of a new clean vehicle? (added March 31, 2023)
A2. If a partnership or an S corporation places a new clean vehicle in service and the new clean vehicle credit is claimed by individuals who are direct or indirect partners of that partnership or shareholders of that S corporation, the modified AGI thresholds apply to those partners or shareholders.

Attached doc:

"The limits on the Commercial Clean Vehicle Credit under IRC Sec. 45W are much less stringent than the Clean Vehicle Credit for individuals under IRC Sec. 30D.

As discussed in our prior article, the credit for individuals has key requirements that could make it difficult to access. Taxpayers utilizing the commercial credit are not subject to the Modified Adjusted Gross Income (MAGI) limitations, vehicle MSRP pricing caps, the mineral and battery component requirements and the final assembly requirements as imposed under IRC 30D for individuals.

IRS guidance is still needed to determine the incremental cost threshold portion of the credit limitation; however, it appears that the credit will be much easier for taxpayers to claim at the business level. In addition, taxpayers will be able to claim a much larger credit ($40,000) for qualifying vehicles over 14,000 pounds, such as the Tesla Electric Semi-truck with an MSRP upwards of $150,000."

Either way I ordered a base MX in ultra red w/ black interior and will take the full 179 deduction. I'll tell my CPA to submit Form 8936 on the business name and if they give it to me they do, if they don't they don't.

 

[Kkustes03]

Does anyone have any clarity on this?

Can you take the $7500 tax credit and use Section 179 to bonus depreciate the vehicle? Can you buy it in your personal name but use it for work?
I am a sole member LLC

 

[ATPMSD]

Does anyone have any clarity on this?

Can you take the $7500 tax credit and use Section 179 to bonus depreciate the vehicle? Can you buy it in your personal name but use it for work?
I am a sole member LLC

When you try to split a car between business and personal use you create a lot of complexities and incur additional record keeping requirements. You need to discussion this with your tax accountant.

 

[toology]

Does anyone have any clarity on this?

Can you take the $7500 tax credit and use Section 179 to bonus depreciate the vehicle? Can you buy it in your personal name but use it for work?
I am a sole member LLC

Buy it in your LLC name

 

[ithinkmac]

yes on all accounts.
I'm on my 3rd X through 179.
Bought under my name, and use it for business. single member LLC. however, my tax credit was pre IRA, so not sure if there's any changes in IRA that might change this. my last X was bought in 2022 before IRA went into effect.

Have taken bonus depreciations and the $7500 credit when it was available, on my other non-Tesla vehicles when Tesla didn't qualify for a few years.

Be warned, I'm not a tax expert, only play one on the internet.

-ThinkMac-

Does anyone have any clarity on this?

Can you take the $7500 tax credit and use Section 179 to bonus depreciate the vehicle? Can you buy it in your personal name but use it for work?
I am a sole member LLC

 

[booziboy]

yes on all accounts.
I'm on my 3rd X through 179.
Bought under my name, and use it for business. single member LLC. however, my tax credit was pre IRA, so not sure if there's any changes in IRA that might change this. my last X was bought in 2022 before IRA went into effect.

Have taken bonus depreciations and the $7500 credit when it was available, on my other non-Tesla vehicles when Tesla didn't qualify for a few years.

Be warned, I'm not a tax expert, only play one on the internet.

-ThinkMac-

I got my first MX in 2018 with Sec 179 with bonus dep. I was not sure how frequently can you keep using sec 179. (too lazy to ask my CPA). I am thinking since its has been 5 years, I should get another one and sell this one off? I would kill IF I could buy with section 179 and somehow take the $7500 under that business credit. we have a legitimate business and can use the care 100% for first year easy.