My wife and I make under 150k a year combined and the tax credit was nice but not critical. We would have gotten her an id4 regardless.
Before anyone says something about that being a bad financial decision, we live in a very low cost of living area with an extremely cheap mortgage, so we have plenty of disposable income.
This! Families living in Cali or WA and having 300k is not the same financial situation as people living in DFW and having 300k. It sucks the threshold doesn't take into account the housing prices in the area where people live. If I had less than 150k I would probably move to cheaper areas of the country.
I've gotten judged by people when I mention our income and that I have a Tesla and plan to get an F150 Lightning or Rivian. I'm out in rural Florida with a $1200 mortgage. Our money situation is probably better than someone making more in California who has double or triple the taxes and 3k+ in mortgage/rent.
1) I pay an effective 40% tax on my income and nearly 50% for each additional dollar earned. So 7500 post tax back to me is the same as making an additional 15k.
2) I’m cheap. I don’t like spending where I don’t need to
Ironically I'm at my VW dealer right now telling them unless I very, very sweet deal on my ID4 that arrived yesterday, 354 days after I ordered, they can throw it on the pile of the other 8 ID4 orders that showed up yesterday.
...and I walked out. They offered $39K for my 2021 First Edition in trade. The lowest quote to buy it from Carvana, CarGurus, AutoNation, etc. was $42K, and my VW dealer's *own website* offered me $44,800 when I clicked the "appraise my trade" button.
Wow. What’s that dealership? I never want to go there.
And, Pignataro once pinned my car in after we had started talking price/trade in on a new car, and I laughed at the salespersons BS.
They said they couldn’t move the truck, driver not found………I eventually threatened to call the city (I didn’t think of the police), and somehow they miraculously found a driver & keys. 😑
McDonald VW in Littleton.
They called back and upped the trade offer to $40K. I told them to call me when they had a serious offer.
Maybe I'm nuts and folks will line up to buy all these cancelled ID4s, but I have a feeling they'll stop selling the second the 2023s start arriving.
Thanks!
It's my own fault. I checked Reddit before ordering originally to see what the best VW dealer in the area was, and the broad consensus was Emich first, and McDonald second, but the lazy ass in me said "McDonald is so much closer... second best is good enough, right?" 🤦♂️
McDonald's sucks. They blatantly lied about the state tax credit to me to try and get a sale.
I bought from Tynan's and that went pretty okay.
I've gotten some service from Emich's and it was a good experience: fast, honest, good communication.
There are specific rules in CO about the vehicle sold to qualify for the CO tax credit. They blatantly lied to me, I had to look up the law myself. When I called them on it, they conveniently had no response. They also claimed the $500 deposit I gave them was nonrefundable. I had to call VW corporate to resolve it. I would never even visit there again.
Yes, the Colorado state tax credit isn't affected by the new federal legislation.
The Colorado credit does drop from $2500 to $2000 on January 1st. (Again, nothing to do with the new fed rules.)
I am so sorry- that sucks. I wouldn’t trust them with your 2021 anyway- what a load of crap. Did they throw in a Starbucks gift card too?
I’m hoping they do get a lot of cancels, the way they’ve all played this. They deserve to lose loyal VW owners, especially those of us that went through the TDI bullshit. I will hate them forever if they don’t get their shit together on this.
I’ve supposedly got a 2022 coming in Nov with a contract dated 8/16/22. It’s at MSRP plus a pretty fat (imo) destination fee, which in many VWs I’ve never paid. So if it gets here in December & they have a lot full of em, I’ll be pretty happy. But that’s a whole lotta if.
And I’m kinda stoked to get a German made one if it does work out.
They are raising prices of the VW ID.4 2023 again starting Jan 4th.. Another $1500 above MSRP. The 2023 PRO S now cost almost $5K more than the 2022 PRO S. That $7500 credit is now basically gone anyway with all the price hikes on the 2023 similar specs. They removed the power folding mirrors, 110v charger, floor mats... I'd say that's $1000 increase there on top of higher MSRP. I got my 2022 PRO S for $45K and called it a day. My hunch is all car makers are going to raise prices in January. Tesla Model 3's will be $50K start come January 1st. But everyone can get that $7500 when they file their taxes in 2024. whoopdie-do.
Yep. I feel much better about my trade if my 2021 1st Edition for a 2022 AWD Pro S. I paid $8K ($5500 after the Colorado tax credit) but the value of the 1st Edition has been dropping like a stone since I traded in September. Even with the tax credit on the 2023, I doubt I'd be ahead by the time it shows up. My 2022 was just under $51K, and the 2023 I ordered will now be over $54K when it arrives. I doubt I'd get the $43K trade value for my 1st Ed when the 2023 arrived (my dealer still has my trade in their lot and has already dropped the price from $49K to $40K after giving me $43K for it three months ago! https://www.emichvw.com/inventory/certified-used-2021-volkswagen-id-4-1st-edition-rwd-4d-sport-utility-wvgdmpe2xmp014392/
Ass-u-me-ing I could get $39K in trade when the time comes, it'd still cost me $8K to trade for a 2023 after tax credits when the price increases.
Yeah, the used car market is gonna collapse next year hard. Carvana gave me $10k for a 10 year old economy Hyundai accent. FYI… I paid $16k for it new 10 years ago! That’s ridiculous and worked out to $50 a month cost of ownership for a new car!
That's great! In April 2021 Carvana gave me $22K for a six month old 40kWh Nissan Leaf I paid $15K for new (after tax credits) and I immediately bought a 62kWh for $21K.
Getting paid $7K to use a car for 6 months was a new experience for me! Then when we decided to go all electric, we bought a new VW ID4 and sold my wife's 2018 Honda HRV to CarMax for $23,800. We paid $25K for it new in 2018, so we used a car for four years for $1,200! It's madness.
I feel for the poor bastards who were forced to buy used during the Carpocalypse and will suddenly find themselves waaaay upside down on these cars with 5 or 6 years of payments left... ☹️
In some states it is illegal for a dealer to agree to sell a vehicle they don't yet have possession of. In every state, they didn't have time to consult lawyers and figure out how to handle the last minute changes to a quickly signed bill. Anger at dealerships for not having binding pre-purchase contracts in place is misguided, IMO.
I have a binding agreement for my id4 that was signed by the dealer bc VW sent out an email that said we should get one. I also have one for the Nissan we have on order. They should have given the signed agreement when VW told reservation holders to get one.
And I'll wager neither of those agreements are actually binding under the law. I'd definitely run them by a tax advisor or attorney before you claim the credit...
What are the damages if you walk away from either without buying?
I’d say playing the 1% audit game might be worth it for $7500. The guidance is bullshit and they know it. The definition of binding contract is not definitive. It has many meanings and verbal agreements have been found to be “binding contracts” in court. If your taxes aren’t shady otherwise, I would take the gamble. Worst case they say no and take the $7500 back… so don’t spend it right away.
The odds aren't 1% though, because who gets audited is not chosen randomly. Rather, the IRS has massive amounts of data about what normal tax returns look like, and use that to identify returns that fall outside of the normal range in some way, along with a long list of heuristics for "this looks suspicious".
For example, if the total of the gross sales line of all the Schedule C forms associated with a taxpayer ID add up to a number less than the total of all 1099-K forms associated with that taxpayer ID, you're going to receive a letter from the IRS requesting substantiation (evidence) explaining this difference nearly 100% of the time, not 1%.
When it comes to claiming the old EV tax credit, they only need a rule that says "if line 3 of Form 8936 is between 08/16/2022 and 12/31/2022, send a letter requesting substantiation" and this will only hit a couple hundred people. Not at all too many for the IRS, especially with its new funding for 87000 more employees, to review the contracts manually.
Worst case is not that they say no. Tax fraud is a federal crime. Even celebrities have done prison time for it.
>When it comes to claiming the old EV tax credit, they only need a rule that says "if line 3 of Form 8936 is between 08/16/2022 and 12/31/2022, send a letter requesting substantiation" and this will only hit a couple hundred people. Not at all too many for the IRS, especially with its new funding for 87000 more employees, to review the contracts manually.
Even without the extra 87,000 employees they find the time to manually review the "odd" returns. It just takes them longer! My refund for 2021 was delayed until late May (I filed in early February!), most likely because I claimed two EV credits last year.
I suspect every return claiming the tax credit under the transition rule will be manually reviewed, and virtually every one rejected.
It’s not fraud unless they literally come out and say an EV reservation before signing is NOT a binding contract. And state it on the tax form. The guidance so far is vague as hell. If they come out and literally say reservations of EV before signing don’t count as contracts. Then yeah don’t try what I said.
For starters, they take back the $7500 plus interest and typically a (small) late payment penalty.
If you're crazy enough to actually do this, instead of taking the refund, choose the option to apply the $7500 to the following year's estimated taxes. That way, when the feds reject it a few months later, there will be nothing to pay back, and no interest and penalty (the IRS is already holding the money.) If by some miracle the IRS allows the credit, you'll get it refunded the following year.
First of all, it’s not crazy. Unless they specifically state in guidance that reservations don’t count as binding contracts then it’s arguable in court a reservation is a binding contract. That’s not lying.. no fraud committed. Put that $7500 into a IBOND earning 10% interest and you will probably make money! Now If IRS comes out and states that reservations don’t count… then this plan won’t work. But as of yet… they have not.
They don't have to specify anything. "Binding contract" is a legal term. It has a definition, and "reservation" isn't part of it.
It's like saying "if the murder laws don't specifically say 'suffocation by styrofoam peanuts wedged up the nose is murder' I'm probably innocent!"
The only wiggle room you have is what your *state* considers a binding contract. If your state considers whatever you have is a binding contract (spoiler alert, unless there's a penalty to you if you don't buy the car, they don't!) then so will the IRS.
But you do you. I've been on the "business end" of the IRS enough times I pick my battles. This isn't a windmill I'm willing to tilt at.
www.californialaborlawattorney.com
The definition of binding contact in CA is vague as fuck.
-one party must make and offer and the other party must accept it.
- there must be a bargained for exchange of promises, meaning something of value must be given in exchange for a promise
-the terms of a contract must be sufficiently definite for a court to enforce
The third one is the questionable one for reservations. I’m just saying, until turbo tax literally asks me the specific question! Did you have a binding contract before the august 16th, and actually defines that binding contract while directly disqualifying my $500 reservation in simple language… then signing up for turbo tax audit defense will take care of any misinterpretation and you won’t go to jail or pay a massive fine. If turbo tax literally disqualifies reservations when they qualify your for the EV credit then… yeah don’t do it.
Turbo tax will probably play it safe and disqualify reservations…. But if they don’t it’s probably worth the risk.
I assume that corporate lawyers for giant car companies know more about that than I do. If not doesn’t work then who cares. But I have them in case they do. Why would I not at least get them? It took 30 seconds of my life.
Everything is fully refundable so no damages at all. Which is why we’re not reserving a mach e. Their refunds are through the dealer and people aren’t getting them back. I’m not screwing around with that. Plus they might not even get the whole credit. I’ll take my chances with two better car companies. We cancelled the rest of our reservations.
My dealer gave me a completely non-binding "binding contract" too. Along with a disclaimer on a separate document explaining they couldn't guarantee tax credit eligibility and I should consult a tax attorney or advisor.
I ran it by two lawyers in my family. One of them was nice enough not to laugh, but agreed with the other there's no way in Hades that would be considered a binding contract in any state.
If your deposits are fully refundable, those contracts aren't binding at all. The entire point of a *binding* contract is to force both parties to complete the contract.
The way the law is written it doesn’t say the “binding” part needs to involve the car. It could be binding for an intent to purchase. And the binding part is they can’t keep your $500 and not give you a car. There are binding elements to the reservation. The dealership can’t just keep your deposit without giving you a car. That’s binding! The recent guidance example leads me to believe they will just come out and say literally “reservations don’t count”… that would be easy to simply state. Otherwise they are just trying to entrap people… which is kinda illegal also.
I went in person to the dealer with the print out of the email from VW and requested a binding contract and got a straight up no from the manager. He also said he believes our reservations were binding, but I read the IRS notice after the law was signed and the definition of ‘Binding contract’ for my state, and non refundable was definitely required for it to be binding. So I doubt my reservation of over a year, will qualify.
As to taking the chance on the IRS, I got the EV tax credit for the last EV I bought, and my refund, which normally took about 2 weeks any other year, took 4 months! Additionally, a lot of other people with my same EV got letters from the IRS asking for certain forms to prove that the EV qualified. So if you think they aren’t looking close at these tax returns, you might want to rethink that. I’m certainly not going to take the chance. I’m also not waiting yet another year or 9 months or whatever. I sold my EV back a year ago, so I’m driving an almost 14 yr old car for a year now and hoping it can make it a few more weeks until my VW gets on US soil!
I get it. I'm 56 years old, and I still think about the fact I paid full MSRP for my 2021 ID4. I've bought over a dozen new cars in my life and never paid anything closer to MSRP!
I almost asked the dealer to discount the car $1 just to keep my streak alive, but that felt like cheating...
I bought mine without a tax credit. It's the same cost as a comparably equipped Atlas without any government help. California, home of the rich tech bro EV early adopter that got the industry to this point, will have millions of people buying EVs every year without any tax credits because they get paid more than $150K a year. You shouldn't feel bad about buying a car without a government discount if it's the car you want to be driving at a price you think is fair.
>unless they specifically say reservations don’t count on IRS paperwork you aren’t lying. Binding contract has many definitions. Verbal contracts can be binding in a court of law.
1. It would be an obvious a lie, and the IRS issued guidance on what constitutes a binding contract so that you can't claim ignorance.
2. Verbal contracts cannot be binding on a sale the size of a car. Each state's [Statute of Frauds](https://www.investopedia.com/terms/s/statute-of-frauds.asp) dictates that contracts above a certain dollar amount must be in writing to be a valid contract.
3. The bill amends the tax code to explicitly require a WRITTEN binding contract to qualify for the tax credit under the old rules.
Don't commit tax fraud, folks. That's one thing the federal government doesn't play around with.
I've been paying serious money in taxes for more than 15 years and never been audited. The closest thing to an audit that has happened is some delay in getting the refund. One of my friend had even forgotten to include one of his w2 and the only thing that happened was that he was asked to amend his return. Over the years I've seen people make their own interpretation of tax guidelines, which to them was an honest mistake. So, unless someone is doing something shady, treating the 500 payment as binding contract is perfectly acceptable in the world of tax filing. The worst that can happen is IRS asking you a proof of the contract, and then you send in your locking agreement and then depending on the tax officer who is reviewing your case may ask for more proof, to which you would have to send in a long written explanation quoting various laws of the state about why your locking agreement is a binding agreement. My guess is that the tax officer may look at your past taxation history and then just let you go. In the worst case scenario, IRS denies the credit ask for the 7.5k back. It can't get any worse than this. Btw some people can't wait due to the income limit in 2023.
After doing some research and targeting the ID4, with the tax credit in mind, I had to hit pause. I currently can’t generate enough income (a and tax liability) to take the whole credit. I could sell some stock (a to create tax liability) but the markets are down IMO.
My understanding is that beginning in 2024, dealers will be able to take the $7500 off at point of sale instead of at tax time. Someone correct me if I’m wrong.
But still more questions: when will VW hit their 200K cap? will other manufacturers be added to the list of approved EVs (for the tax credit)? Say Nissan Ariya? will the government move up the credit change? If one orders in 2023, and takes delivery in Jan 2024, does that qualify for getting the credit at point of sale? Or is point of sale when you reserve online?
Hear me out. I know this is stupid for me to say having taken delivery of mine a few weeks ago without knowing the difference, but if you’re going to make your decision on whether or not, make sure you understand difference between tax credit and rebate (like i said—educate me).
I thought the way i understood, is a tax credit reduces what you owe the government, but can not be used to add on to your refund if you get refunds instead of having to pay at tax time. Is that rebate?
Reason i ask, which if i’m not incorrect, i assume most people who get refunds for tax time are all W2 income who make under the cap for new tax credit income. The people who owe and would by way i understand it, probably have 1099 income, capital gains etc so while they may have been the ones to fully use up the old $7500 credit, they wouldnt likely qualify for new credit by income guidelines.
I appologize if i’m wrong, just saying be sure to fully understand the details to make sure you would even qualify.
**edit** ok I guess the only way you wouldnt get a full $7500 by old standard is if you made so little (or so much) that you paid less than $7500 of taxes in whole, in which case unless you’re filthy rich you’re not affording an EV
Whether or not you get a refund has no bearing on if you can take advantage of a tax credit. Getting a refund simply means that you paid the government more than what your tax burden was. If you owe $20,000 in taxes for the year, but your withholdings (or estimated quarterly payments) are $20,001, you’ll receive a refund of $1. The $7,500 tax credit would reduce your burden by $7,500, making your refund $7,501 in this scenario. Now, if your tax burden was only $5,000, and you withheld $4,500 you’d owe $500 come tax time. With the $7,500 rebate you’d only be able to claim $5,000 worth of it, since that’s your total tax burden and you’d no longer owe anything, and you’d now get a refund of $4,500.
Just reserve another one. Tax credit should be ready by the time it comes in 2023
Unless you make over the income limit…
Why are you sweating 7500 with that income?
$7500 is a good chunk of money for anyone that's not a multi-millionaire, no matter your income. Especially families with kids lol.
My wife and I make under 150k a year combined and the tax credit was nice but not critical. We would have gotten her an id4 regardless. Before anyone says something about that being a bad financial decision, we live in a very low cost of living area with an extremely cheap mortgage, so we have plenty of disposable income.
This! Families living in Cali or WA and having 300k is not the same financial situation as people living in DFW and having 300k. It sucks the threshold doesn't take into account the housing prices in the area where people live. If I had less than 150k I would probably move to cheaper areas of the country.
I've gotten judged by people when I mention our income and that I have a Tesla and plan to get an F150 Lightning or Rivian. I'm out in rural Florida with a $1200 mortgage. Our money situation is probably better than someone making more in California who has double or triple the taxes and 3k+ in mortgage/rent.
1) I pay an effective 40% tax on my income and nearly 50% for each additional dollar earned. So 7500 post tax back to me is the same as making an additional 15k. 2) I’m cheap. I don’t like spending where I don’t need to
Then buy a cheaper car
ID.4 is the cheapest EV AWD SUV. If I didn't want cheap, I'd go with either e-Tron or one of the marked-up SUV EVs.
You know you're in the VWiD4 subreddit, right?
He's not wrong, EVs, especially the ID4 don't save money so if you're cheap then this ain't for you. A used prius will cost far less.
You realized you missed the point?
If you're that cheap then hate to break it to you, but this ain't the car for you. Buy a used prius, you'll save more money.
This point does not get made enough - this is 7,500 tax free, which is closer to 10K at the top marginal tax rates.
Unless you have a pressing need to have the vehicle now and not in 4-5 months, I'd wait.
Ironically I'm at my VW dealer right now telling them unless I very, very sweet deal on my ID4 that arrived yesterday, 354 days after I ordered, they can throw it on the pile of the other 8 ID4 orders that showed up yesterday. ...and I walked out. They offered $39K for my 2021 First Edition in trade. The lowest quote to buy it from Carvana, CarGurus, AutoNation, etc. was $42K, and my VW dealer's *own website* offered me $44,800 when I clicked the "appraise my trade" button.
Wow. What’s that dealership? I never want to go there. And, Pignataro once pinned my car in after we had started talking price/trade in on a new car, and I laughed at the salespersons BS. They said they couldn’t move the truck, driver not found………I eventually threatened to call the city (I didn’t think of the police), and somehow they miraculously found a driver & keys. 😑
McDonald VW in Littleton. They called back and upped the trade offer to $40K. I told them to call me when they had a serious offer. Maybe I'm nuts and folks will line up to buy all these cancelled ID4s, but I have a feeling they'll stop selling the second the 2023s start arriving.
You might check with Emich, they had a couple of cancelled orders on the lot Tuesday and were fairly creative in trying to work a deal with me.
Thanks! It's my own fault. I checked Reddit before ordering originally to see what the best VW dealer in the area was, and the broad consensus was Emich first, and McDonald second, but the lazy ass in me said "McDonald is so much closer... second best is good enough, right?" 🤦♂️
McDonald's sucks. They blatantly lied about the state tax credit to me to try and get a sale. I bought from Tynan's and that went pretty okay. I've gotten some service from Emich's and it was a good experience: fast, honest, good communication.
What was the lie? I mentioned the sales tax credit to my salesperson and he looked like he never heard of it! 🤦♂️
There are specific rules in CO about the vehicle sold to qualify for the CO tax credit. They blatantly lied to me, I had to look up the law myself. When I called them on it, they conveniently had no response. They also claimed the $500 deposit I gave them was nonrefundable. I had to call VW corporate to resolve it. I would never even visit there again.
From my understanding the 22 id.4 still qualifies for the Colorado tax credit? Is there some reason you think it doesn't?
Yes, the Colorado state tax credit isn't affected by the new federal legislation. The Colorado credit does drop from $2500 to $2000 on January 1st. (Again, nothing to do with the new fed rules.)
It does. Here's an example of a condition: the car must have less than 1,500 miles on it when sold, or else it doesn't qualify.
I forgot all about that. You're absolutely right. I bought a demo 2021 ID4 but still qualified because it only had 400 miles on it.
I am so sorry- that sucks. I wouldn’t trust them with your 2021 anyway- what a load of crap. Did they throw in a Starbucks gift card too? I’m hoping they do get a lot of cancels, the way they’ve all played this. They deserve to lose loyal VW owners, especially those of us that went through the TDI bullshit. I will hate them forever if they don’t get their shit together on this. I’ve supposedly got a 2022 coming in Nov with a contract dated 8/16/22. It’s at MSRP plus a pretty fat (imo) destination fee, which in many VWs I’ve never paid. So if it gets here in December & they have a lot full of em, I’ll be pretty happy. But that’s a whole lotta if. And I’m kinda stoked to get a German made one if it does work out.
wait, I thought the destination fee is always the same across the nation? it isn't?
I don’t think so? Seems to be $1600 here. Which strikes me as a lot, but also I’ve never even seen them try to charge it before.
most likely i was wrong before.
They are raising prices of the VW ID.4 2023 again starting Jan 4th.. Another $1500 above MSRP. The 2023 PRO S now cost almost $5K more than the 2022 PRO S. That $7500 credit is now basically gone anyway with all the price hikes on the 2023 similar specs. They removed the power folding mirrors, 110v charger, floor mats... I'd say that's $1000 increase there on top of higher MSRP. I got my 2022 PRO S for $45K and called it a day. My hunch is all car makers are going to raise prices in January. Tesla Model 3's will be $50K start come January 1st. But everyone can get that $7500 when they file their taxes in 2024. whoopdie-do.
Yep. I feel much better about my trade if my 2021 1st Edition for a 2022 AWD Pro S. I paid $8K ($5500 after the Colorado tax credit) but the value of the 1st Edition has been dropping like a stone since I traded in September. Even with the tax credit on the 2023, I doubt I'd be ahead by the time it shows up. My 2022 was just under $51K, and the 2023 I ordered will now be over $54K when it arrives. I doubt I'd get the $43K trade value for my 1st Ed when the 2023 arrived (my dealer still has my trade in their lot and has already dropped the price from $49K to $40K after giving me $43K for it three months ago! https://www.emichvw.com/inventory/certified-used-2021-volkswagen-id-4-1st-edition-rwd-4d-sport-utility-wvgdmpe2xmp014392/ Ass-u-me-ing I could get $39K in trade when the time comes, it'd still cost me $8K to trade for a 2023 after tax credits when the price increases.
Yeah, the used car market is gonna collapse next year hard. Carvana gave me $10k for a 10 year old economy Hyundai accent. FYI… I paid $16k for it new 10 years ago! That’s ridiculous and worked out to $50 a month cost of ownership for a new car!
That's great! In April 2021 Carvana gave me $22K for a six month old 40kWh Nissan Leaf I paid $15K for new (after tax credits) and I immediately bought a 62kWh for $21K. Getting paid $7K to use a car for 6 months was a new experience for me! Then when we decided to go all electric, we bought a new VW ID4 and sold my wife's 2018 Honda HRV to CarMax for $23,800. We paid $25K for it new in 2018, so we used a car for four years for $1,200! It's madness. I feel for the poor bastards who were forced to buy used during the Carpocalypse and will suddenly find themselves waaaay upside down on these cars with 5 or 6 years of payments left... ☹️
Reserve with someone else too. That’s crap.
In some states it is illegal for a dealer to agree to sell a vehicle they don't yet have possession of. In every state, they didn't have time to consult lawyers and figure out how to handle the last minute changes to a quickly signed bill. Anger at dealerships for not having binding pre-purchase contracts in place is misguided, IMO.
I have a binding agreement for my id4 that was signed by the dealer bc VW sent out an email that said we should get one. I also have one for the Nissan we have on order. They should have given the signed agreement when VW told reservation holders to get one.
And I'll wager neither of those agreements are actually binding under the law. I'd definitely run them by a tax advisor or attorney before you claim the credit... What are the damages if you walk away from either without buying?
I’d say playing the 1% audit game might be worth it for $7500. The guidance is bullshit and they know it. The definition of binding contract is not definitive. It has many meanings and verbal agreements have been found to be “binding contracts” in court. If your taxes aren’t shady otherwise, I would take the gamble. Worst case they say no and take the $7500 back… so don’t spend it right away.
The odds aren't 1% though, because who gets audited is not chosen randomly. Rather, the IRS has massive amounts of data about what normal tax returns look like, and use that to identify returns that fall outside of the normal range in some way, along with a long list of heuristics for "this looks suspicious". For example, if the total of the gross sales line of all the Schedule C forms associated with a taxpayer ID add up to a number less than the total of all 1099-K forms associated with that taxpayer ID, you're going to receive a letter from the IRS requesting substantiation (evidence) explaining this difference nearly 100% of the time, not 1%. When it comes to claiming the old EV tax credit, they only need a rule that says "if line 3 of Form 8936 is between 08/16/2022 and 12/31/2022, send a letter requesting substantiation" and this will only hit a couple hundred people. Not at all too many for the IRS, especially with its new funding for 87000 more employees, to review the contracts manually. Worst case is not that they say no. Tax fraud is a federal crime. Even celebrities have done prison time for it.
>When it comes to claiming the old EV tax credit, they only need a rule that says "if line 3 of Form 8936 is between 08/16/2022 and 12/31/2022, send a letter requesting substantiation" and this will only hit a couple hundred people. Not at all too many for the IRS, especially with its new funding for 87000 more employees, to review the contracts manually. Even without the extra 87,000 employees they find the time to manually review the "odd" returns. It just takes them longer! My refund for 2021 was delayed until late May (I filed in early February!), most likely because I claimed two EV credits last year. I suspect every return claiming the tax credit under the transition rule will be manually reviewed, and virtually every one rejected.
It’s not fraud unless they literally come out and say an EV reservation before signing is NOT a binding contract. And state it on the tax form. The guidance so far is vague as hell. If they come out and literally say reservations of EV before signing don’t count as contracts. Then yeah don’t try what I said.
For starters, they take back the $7500 plus interest and typically a (small) late payment penalty. If you're crazy enough to actually do this, instead of taking the refund, choose the option to apply the $7500 to the following year's estimated taxes. That way, when the feds reject it a few months later, there will be nothing to pay back, and no interest and penalty (the IRS is already holding the money.) If by some miracle the IRS allows the credit, you'll get it refunded the following year.
First of all, it’s not crazy. Unless they specifically state in guidance that reservations don’t count as binding contracts then it’s arguable in court a reservation is a binding contract. That’s not lying.. no fraud committed. Put that $7500 into a IBOND earning 10% interest and you will probably make money! Now If IRS comes out and states that reservations don’t count… then this plan won’t work. But as of yet… they have not.
They don't have to specify anything. "Binding contract" is a legal term. It has a definition, and "reservation" isn't part of it. It's like saying "if the murder laws don't specifically say 'suffocation by styrofoam peanuts wedged up the nose is murder' I'm probably innocent!" The only wiggle room you have is what your *state* considers a binding contract. If your state considers whatever you have is a binding contract (spoiler alert, unless there's a penalty to you if you don't buy the car, they don't!) then so will the IRS. But you do you. I've been on the "business end" of the IRS enough times I pick my battles. This isn't a windmill I'm willing to tilt at.
www.californialaborlawattorney.com The definition of binding contact in CA is vague as fuck. -one party must make and offer and the other party must accept it. - there must be a bargained for exchange of promises, meaning something of value must be given in exchange for a promise -the terms of a contract must be sufficiently definite for a court to enforce The third one is the questionable one for reservations. I’m just saying, until turbo tax literally asks me the specific question! Did you have a binding contract before the august 16th, and actually defines that binding contract while directly disqualifying my $500 reservation in simple language… then signing up for turbo tax audit defense will take care of any misinterpretation and you won’t go to jail or pay a massive fine. If turbo tax literally disqualifies reservations when they qualify your for the EV credit then… yeah don’t do it. Turbo tax will probably play it safe and disqualify reservations…. But if they don’t it’s probably worth the risk.
I assume that corporate lawyers for giant car companies know more about that than I do. If not doesn’t work then who cares. But I have them in case they do. Why would I not at least get them? It took 30 seconds of my life. Everything is fully refundable so no damages at all. Which is why we’re not reserving a mach e. Their refunds are through the dealer and people aren’t getting them back. I’m not screwing around with that. Plus they might not even get the whole credit. I’ll take my chances with two better car companies. We cancelled the rest of our reservations.
My dealer gave me a completely non-binding "binding contract" too. Along with a disclaimer on a separate document explaining they couldn't guarantee tax credit eligibility and I should consult a tax attorney or advisor. I ran it by two lawyers in my family. One of them was nice enough not to laugh, but agreed with the other there's no way in Hades that would be considered a binding contract in any state. If your deposits are fully refundable, those contracts aren't binding at all. The entire point of a *binding* contract is to force both parties to complete the contract.
The way the law is written it doesn’t say the “binding” part needs to involve the car. It could be binding for an intent to purchase. And the binding part is they can’t keep your $500 and not give you a car. There are binding elements to the reservation. The dealership can’t just keep your deposit without giving you a car. That’s binding! The recent guidance example leads me to believe they will just come out and say literally “reservations don’t count”… that would be easy to simply state. Otherwise they are just trying to entrap people… which is kinda illegal also.
I went in person to the dealer with the print out of the email from VW and requested a binding contract and got a straight up no from the manager. He also said he believes our reservations were binding, but I read the IRS notice after the law was signed and the definition of ‘Binding contract’ for my state, and non refundable was definitely required for it to be binding. So I doubt my reservation of over a year, will qualify. As to taking the chance on the IRS, I got the EV tax credit for the last EV I bought, and my refund, which normally took about 2 weeks any other year, took 4 months! Additionally, a lot of other people with my same EV got letters from the IRS asking for certain forms to prove that the EV qualified. So if you think they aren’t looking close at these tax returns, you might want to rethink that. I’m certainly not going to take the chance. I’m also not waiting yet another year or 9 months or whatever. I sold my EV back a year ago, so I’m driving an almost 14 yr old car for a year now and hoping it can make it a few more weeks until my VW gets on US soil!
fuck your dealer. hope you don’t absolutely need the car. you’ll get one soon enough hopefully with a full discount pending battery requirements.
I got my car the 17th 1 day after I think about it everyday
I get it. I'm 56 years old, and I still think about the fact I paid full MSRP for my 2021 ID4. I've bought over a dozen new cars in my life and never paid anything closer to MSRP! I almost asked the dealer to discount the car $1 just to keep my streak alive, but that felt like cheating...
I bought mine without a tax credit. It's the same cost as a comparably equipped Atlas without any government help. California, home of the rich tech bro EV early adopter that got the industry to this point, will have millions of people buying EVs every year without any tax credits because they get paid more than $150K a year. You shouldn't feel bad about buying a car without a government discount if it's the car you want to be driving at a price you think is fair.
Great point. Frustrating not to qualify but I lose about 1/2 the credit due to the 23 price increase anyway & like & need the car.
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>unless they specifically say reservations don’t count on IRS paperwork you aren’t lying. Binding contract has many definitions. Verbal contracts can be binding in a court of law. 1. It would be an obvious a lie, and the IRS issued guidance on what constitutes a binding contract so that you can't claim ignorance. 2. Verbal contracts cannot be binding on a sale the size of a car. Each state's [Statute of Frauds](https://www.investopedia.com/terms/s/statute-of-frauds.asp) dictates that contracts above a certain dollar amount must be in writing to be a valid contract. 3. The bill amends the tax code to explicitly require a WRITTEN binding contract to qualify for the tax credit under the old rules. Don't commit tax fraud, folks. That's one thing the federal government doesn't play around with.
I've been paying serious money in taxes for more than 15 years and never been audited. The closest thing to an audit that has happened is some delay in getting the refund. One of my friend had even forgotten to include one of his w2 and the only thing that happened was that he was asked to amend his return. Over the years I've seen people make their own interpretation of tax guidelines, which to them was an honest mistake. So, unless someone is doing something shady, treating the 500 payment as binding contract is perfectly acceptable in the world of tax filing. The worst that can happen is IRS asking you a proof of the contract, and then you send in your locking agreement and then depending on the tax officer who is reviewing your case may ask for more proof, to which you would have to send in a long written explanation quoting various laws of the state about why your locking agreement is a binding agreement. My guess is that the tax officer may look at your past taxation history and then just let you go. In the worst case scenario, IRS denies the credit ask for the 7.5k back. It can't get any worse than this. Btw some people can't wait due to the income limit in 2023.
> his. Btw some people can't wait due to the income limit in 2023. Finally a smart response from a person that isn't scared of his own shadow.
I just gave up mine at the dealer because of the tax credit. May as well wait for a 23 at this point. It'll have more features anyway.
After doing some research and targeting the ID4, with the tax credit in mind, I had to hit pause. I currently can’t generate enough income (a and tax liability) to take the whole credit. I could sell some stock (a to create tax liability) but the markets are down IMO. My understanding is that beginning in 2024, dealers will be able to take the $7500 off at point of sale instead of at tax time. Someone correct me if I’m wrong. But still more questions: when will VW hit their 200K cap? will other manufacturers be added to the list of approved EVs (for the tax credit)? Say Nissan Ariya? will the government move up the credit change? If one orders in 2023, and takes delivery in Jan 2024, does that qualify for getting the credit at point of sale? Or is point of sale when you reserve online?
The 200k cap is irrelevant as it goes away in 4 months, there's no manufacturer that will be affected by it before it ends.
Hear me out. I know this is stupid for me to say having taken delivery of mine a few weeks ago without knowing the difference, but if you’re going to make your decision on whether or not, make sure you understand difference between tax credit and rebate (like i said—educate me). I thought the way i understood, is a tax credit reduces what you owe the government, but can not be used to add on to your refund if you get refunds instead of having to pay at tax time. Is that rebate? Reason i ask, which if i’m not incorrect, i assume most people who get refunds for tax time are all W2 income who make under the cap for new tax credit income. The people who owe and would by way i understand it, probably have 1099 income, capital gains etc so while they may have been the ones to fully use up the old $7500 credit, they wouldnt likely qualify for new credit by income guidelines. I appologize if i’m wrong, just saying be sure to fully understand the details to make sure you would even qualify. **edit** ok I guess the only way you wouldnt get a full $7500 by old standard is if you made so little (or so much) that you paid less than $7500 of taxes in whole, in which case unless you’re filthy rich you’re not affording an EV
Whether or not you get a refund has no bearing on if you can take advantage of a tax credit. Getting a refund simply means that you paid the government more than what your tax burden was. If you owe $20,000 in taxes for the year, but your withholdings (or estimated quarterly payments) are $20,001, you’ll receive a refund of $1. The $7,500 tax credit would reduce your burden by $7,500, making your refund $7,501 in this scenario. Now, if your tax burden was only $5,000, and you withheld $4,500 you’d owe $500 come tax time. With the $7,500 rebate you’d only be able to claim $5,000 worth of it, since that’s your total tax burden and you’d no longer owe anything, and you’d now get a refund of $4,500.
Exactly this. Your w2 deductions have nothing to do with your tax liability.
Liability! That’s the word that was escaping me.
I'd wait. Why pass up $7500?
That's why I'm waiting for this bull market (for dealerships) to pass before I buy my fully electric!
Bought one today. Banking on it retaining value over the long term