Federal EV Tax Credit

[JerryBob]

I purchased my Bolt in the 2017 tax year. I was not sure due to the unknowns at the time of the new tax laws (early versions eliminated the EV Tax Credit) that would be in place for 2018 if I was doing the right thing or not. I bought because they had the model with the options I wanted available and they were starting to sell out. With the option of hindsight I can make the following conclusions. For 2017 my taxable income had my Fed tax liability slightly above the $7,500 limit qualifying me for the full amount. For 2018 due to the new tax tables it will be below that so I would not qualify for the full amount. GM is also expected to reach 200,000 cars sold in 2018 so the tax credit will be reduced. It is my theory that is why they are holding back on 2018 delivery's because it matters which fiscal quarter they hit the 200,000 mark. Are the new tax tables going to affect anyone else's Fed EV tax credit eligibility amount or is my math wrong?

 

[Sperling3]

Your math may be right, but the number of individuals this affects is minimal. Taking a SWAG, I'd say 2% of individuals are at the $7,500 cusp and will be below that under the new tax bill. Add to that, the amount one would lose is not the entire tax reduction because of the bill, but only the amount of their tax liability that dips below $7,500. For example, if someone has a current tax liability of $10,000 and the new tax bill reduces their liability by $2,501, they will dip below the $7,500 full credit opportunity by only $1.

 

[DNAinaGoodWay]

And a lot of us lease, so it doesn’t matter

 

[DucRider]

I purchased my Bolt in the 2017 tax year. I was not sure due to the unknowns at the time of the new tax laws (early versions eliminated the EV Tax Credit) that would be in place for 2018 if I was doing the right thing or not. I bought because they had the model with the options I wanted available and they were starting to sell out. With the option of hindsight I can make the following conclusions. For 2017 my taxable income had my Fed tax liability slightly above the $7,500 limit qualifying me for the full amount. For 2018 due to the new tax tables it will be below that so I would not qualify for the full amount. GM is also expected to reach 200,000 cars sold in 2018 so the tax credit will be reduced. It is my theory that is why they are holding back on 2018 delivery's because it matters which fiscal quarter they hit the 200,000 mark. Are the new tax tables going to affect anyone else's Fed EV tax credit eligibility amount or is my math wrong?

Your math is wrong on at least one count:
GM is too far away from the 200K mark to be manipulating deliveries. A delay to the switch is much more likely to be attributable to the ZEV credit reduction and the changes in traveling rules for Section 177 States that take effect with 2018 MY vehicles. CARB bases their quotas and credit formulas on model years, not production or sales dates.

As to the Fed Tax changes, here are some basic numbers for minimum AGI to qualify for the full $7500. (simplified, AGI = income after deductions). These are but 2 scenarios, head of household, dependents/children, etc will all have different results.

Single:
2017 $45,451
2018 $52,548
Filing Jointly:
2017 $56,218
2018 $65,676

In addition, the standard deduction + personal exemption (personal exemption eliminated in 2018) =
Single:
2017 $10,400
2018 $12,000
change = $1,600 additional deduction
Filing Jointly:
2017 $20,800
2018 $24,000
change = $3,200 additional deduction

So a very basic summary is that the minimum income to get the full Tax Credit has increased by:
Single = $8,697
Filing Jointly = $12,658

Not sure how many people that catches, but probably not an insignificant number.

 

[JerryBob]

It would affect everyone who makes less than $52,548 in 2018. So if I am single and made $45,451 in 2017 I would have been eligible for the full credit. I get a 3% raise in 2018 to $46,815. That is now $5,733 below the new full credit amount. At 23% tax rate that would be $1,318.59, or a $6,181.41 credit. More cost out of pocket for the car.

 

[marshallinwa]

It would affect everyone who makes less than $52,548 in 2018. So if I am single and made $45,451 in 2017 I would have been eligible for the full credit. I get a 3% raise in 2018 to $46,815. That is now $5,733 below the new full credit amount. At 23% tax rate that would be $1,318.59, or a $6,181.41 credit. More cost out of pocket for the car.

Perhaps almost everybody, but for those who have a 401k with a former employer, you do have an option of doing a Roth conversion in an IRA and increase your taxable income.

 

[SparkE]

This is all moot at this point. 2017 is over, you can't go back to 2017 and buy a car.

 

[GetOffYourGas]

This is all moot at this point. 2017 is over, you can't go back to 2017 and buy a car.

No, but to marshallinwa's point, if you did buy a car, I believe you have until April 15th to do the Roth conversion, and still claim it on your 2017 return.

 

[MikeDabrowski2017]

I am retired with minimal tax but wanted to take advantage of the tax credits
After looking at all my options i decided that the best way to use the credit was to cash in the savings bonds that have been collecting taxable interest for most of my life.
The plan worked out well, i got the full 7500 credit and bailed out my bonds and got to keep all the interest.
Yea!