TRANSFER OF EV CREDIT TO DEALER for 2024

[HOPE2]

Hi to all. Hope you guys had a time to read about transfer credit.

I found this example regarding EV transfer credit to dealer. Susan wishes to purchase a new electric car that qualifies for a nonrefundable
 $7,500 tax credit. Her total tax liability without the credit equals $3,000.
Rather than lose $4,500 worth of tax credits, she elects to transfer the $7,500
tax credit to the dealership selling her the car. The dealership then reduces
the sale price of the car by $7,500 and claims the $7,500 tax credit on its
tax return. The election thus allows Susan to receive the full benefit of the
$7,500 tax credit and the dealership is reimbursed by the government for
selling the car at a reduced price.

And I found this one on FAQ of the IRS:

What if a buyer has insufficient tax liability to fully use a transferred credit? (added October 6, 2023)
The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer’s regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.

It means as of 2024 if you have not any tax liability you can take $7500 credit. ( in dealership) Am I right?

Do we need to file 8936 even if the credit already has been taken in dealership just to check AGI's limit?

I would greatly appreciated it!

[Just-Lisa-Now-]

I havent even dug into all this yet, Im trying not to clog up my holiday season with other people's tax burdens. 

Im taking my federal and state update classes in mid December (hopefully these classes will explain these types of things in more depth with better understanding, that's what I'm paying for!) then I'll start trying to iron out all this new energy and electric credit stuff in January.

[HOPE2]

Thanks Lisa. Where is the class and how can I attend there?

[Gildardo]

I'm just confused.

How you do on that date since CRTP Renewal ends October 31, 2023. I prefer the option of taking the classes on those months!

[HOPE2]

Lisa meant regarding tax law updates for 2023 I think not about renewal.

[TaxGuyBill]

---

@HOPE2 wrote:

It means as of 2024 if you have not any tax liability you can take $7500 credit. ( in dealership) Am I right?

Do we need to file 8936 even if the credit already has been taken in dealership just to check AGI's limit?

---

Yes, that is what the IRS FAQ says. The actual law merely says that "recapture" applies if the taxpayer exceeds the income limits.  It is silent about recapture in regards to tax liability.

We don't know yet, but that is over a year away until we need to deal with that.  Most likely, we will need to indicate we transferred the credit and to determine if there is "recapture" if the income is too high.  But we don't know yet, and we won't be filing that until at least 14 months from now.

[BobKamman]

So if the tax is less than $7,500, nothing has to be paid back, by either the dealer or buyer.  But if the buyer's income exceeds the AGI limit, they take a hit. They must provide the dealer with,

"An attestation that in the event you exceed the applicable modified AGI limitations, you will repay the amount received as an addition to tax for the tax year the vehicle was placed in service."

https://www.irs.gov/newsroom/topic-h-transfer-of-new-clean-vehicle-credit-and-previously-owned-clean... 

[Just-Lisa-Now-]

Theyre offering tax update classes everywhere right now, Im in California so I go through Spidell for a combined Federal and State course.  They do a really thorough job and give you a physical book as well as PDF to go along with the webinar.   They used to have an in person seminar near me, thats what I'd really rather attend,  but ever since Covid, the nearest one is too far for the traffic hassle to be worth it for me.

[Just-Lisa-Now-]

@Gildardo I take my update classes in December and they count toward the next years CEs, but I always take a self study course in August that gives me all the hours I need for my CTEC/AFSP requirements, all the other CEs I take are just gravy and for my own knowledge.

[HOPE2]

Yes I agree with you but my clients want to buy Tesla in 2024 usually it the best time first month of the year to stop withholding to get the credit. That is why we need to have enough information to give them advice.

[HOPE2]

Thanks @BobKamman.

[BobKamman]

@HOPE2  But if they get the credit from the dealer, there is no need to stop withhholding, right?

"According to Edmunds, “If you’re truly looking to get the best price on a used car, you’ll want to shop in December.” Dealerships, including Tesla, often have sales events at the end of the year to clear out inventory, make way for new models and hit quotas."

https://www.nasdaq.com/articles/6-ways-to-get-a-cheap-deal-on-a-tesla-before-the-end-of-2023

The supply of Teslas in January is not going to be any higher than usual, but the demand will greatly increase because of all the buyers waiting for the dealer tax credit.  This reminds me of when the price of a solar water heater went from $1,500 to $2,800 as soon as a $1,000 tax credit was available. 

But then, there's no telling what Elon Musk will do.