Tesla Motors makes electric vehicles and, in the US, people had a federal tax credit of $7,500 for Tesla. It varies based on the size of the battery but because Tesla uses big batteries they qualify for the full amount of federal tax credit. Once a manufacturer hits their 200,000-car delivered in the US, EV credit starts to phase out. Tesla has confirmed that they have completed delivering 200,000 cars in July 2018. That means that if you have a tax liability of $7,500 or more, the next year you’ll be able to get that money. You’ll be able to write off $7,500 of your purchase and then potentially increase your return if you were getting a return or just reduce your tax liability so let’s see how it works.
How Does Tesla Tax Credit Work
Let’s consider the figures which are given by “TaxFoundation.org”
This chart explaining how the percentage of taxes that people pay by income. So according to that chart if you make money between $50,000 and $75,000 a year and you’re paying 15% in taxes overall then you will accrue about a $7,500 tax liability or more. That means that for all the income that you earned as a wage earner and a W-2 employee of a company, you will owe about $7,500 or more. If you have a regular job at a company you pay those taxes in employment taxes and Social Security taxes. This is difference between gross and net so that’s kind of where this comes from. You are already paying these taxes so at the end of the year you file and you have deductions such as you bought a house, maybe you put solar panels up, maybe had a kid things like that are big deductions and then the government says “you paid X amount of dollars as you were supposed to as a wage earner” but then you had all these deductions that government didn’t know about so you get a refund.
To qualify for that $7,500 tax credit you need to make between $50,000 and $75,000
These $7,500 is like an additional deduction on your taxes next year. If you don’t make enough money you’re not going to accrue enough of tax liability and therefore you won’t be able to actually take full advantage of it even though you may be earned it and it’s available to you because you didn’t make enough money you won’t be able to take full advantage. To qualify for that $7,500 tax credit you need to make between $50,000 and $75,000.
You still have to pay for the car in full
The next thing is that you still have to pay for the car in full. When you buy the car, let’s say you buy a performance model and it’s upwards of $75,000 you’re gonna need to you know write a check if you can or finance that loan for the full price of the vehicle. This $7,500 doesn’t appear anywhere, you don’t get any of that money off that price meaning that the loan that you get is gonna be for the full amount. Even if you’re in California and you get the $2,500 state rebate which is a check, you’re still going to have to finance that full amount so you won’t be getting any discounts on the price of the car. It’s a tax credit it doesn’t reduce the price of the car and you may not be eligible for the full thing.
In 2018/2019, Highest Tax Credit You Could Get was $3,750
Tesla has actually hit their 200,000 are delivered in the US so this tax credit is going to begin to its phase-out period. In July Tesla hit their 200,000 the car delivered meaning that any Tesla delivered in Q3 or Q4 the remainder of 2018 will be eligible to receive that $7,500 rebate. The beginning of the first half of this year i.e. 2019 that is going to drop to $3,750, 50 percent of the previous amount so in 2020 you will be able to get $3,750 back on your tax refund. If you take delivery in the second half of 2019, It will be 50 percent of it so that will be $1875. All of those deductions, those credits come in 2020 so you’re still pretty far out and you don’t deduct any of that so you know that’s kind of the what’s eligible and available to you now beginning in 2020 the tax credit will have completely phased out, now its 2020 and you can not get tax benefits now.
Federal Credits Are Not the Only Refundable Tax Credits
It depends where you live. You may be able to take advantage of generous state and local incentives to purchase a new full EV or other plug-in vehicles. Colorado offers the credit up to $5,000 so with the federal tax credit you can save $12,500 on the price of the car. Before you buy a battery-electric or other plug-in car, be sure to check with your local utility. They might also offer you credits, discounts, or time-of-use rates that can lower your cost of energy.
Still, if you have any confusion about how it worked then comment down below.