Form 8936 tax credit

[KennyPratt42]

My Mach-E arrived at the dealership today and should be ready for pick up on Monday. We are planning to register the vehicle to two related people that live in separate locations (parent/child). Will it make any difference to the IRS which person's address is on the registration or who is carrying insurance on the vehicle? Or any other issues that we might run into? (Both plan to use the vehicle for personal use, but only the parent has a federal tax liability above $7,500 and the vehicle will spend more time at the child's house and would prefer to have it insured by child.)

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[OWG]

My Mach-E arrived at the dealership today and should be ready for pick up on Monday. We are planning to register the vehicle to two related people that live in separate locations (parent/child). Will it make any difference to the IRS which person's address is on the registration or who is carrying insurance on the vehicle? Or any other issues that we might run into? (Both plan to use the vehicle for personal use, but only the parent has a federal tax liability above $7,500 and the vehicle will spend more time at the child's house and would prefer to have it insured by child.)

Not a Tax Lawyer or a CPA, but:

Registration aside who is the buyer?
If financing is is involved who is carrying the loan?
If the answer isn't the person claiming, the tax credit then I think the action is suspect.

Recommend that you consult with Tax Lawyer or a CPA.

 

[ElectrifyME]

If you are the buyer (which is what k presume the dealer thinks you are), wouldn’t you be the one who has to take the tax credit? As the buyer, you are the registered owner at the sale I would think but then you would transfer the title ( like selling it)? Curious because if this were the case, we could all just slap down deposits galore and the bring in the “buyer” at the signing of papers and I would think dealers would not allow such a business transfer… these are my thoughts/questions, not my advice.

 

[Bigfeets]

My Mach-E arrived at the dealership today and should be ready for pick up on Monday. We are planning to register the vehicle to two related people that live in separate locations (parent/child). Will it make any difference to the IRS which person's address is on the registration or who is carrying insurance on the vehicle? Or any other issues that we might run into? (Both plan to use the vehicle for personal use, but only the parent has a federal tax liability above $7,500 and the vehicle will spend more time at the child's house and would prefer to have it insured by child.)

Federal Tax Credit Requirements from IRS Form 8936 Instructions
The following requirements must be met to qualify for
the credit.
• You are the owner of the vehicle. If the vehicle is
leased, only the lessor and not the lessee, is entitled to
the credit.
• You placed the vehicle in service during your tax year.
• The vehicle is manufactured primarily for use on public
streets, roads, and highways.
• The original use of the vehicle began with you.
• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States.

 

[RickMachE]

You've got a couple of things going on here. First, the tax credit, which is clearly answered already.

Second, use of the vehicle and insurance. I suggest you carefully consult with your insurance company, or your child's insurance company, as to proper title, registration, and insurance of a vehicle that is kept at two different addresses and driven by different people.

For example, titling a car to both people, but only one of them insures it. And the title can't be in the child's name, because the tax credit was claimed by the parent.

You also want to clearly understand your liability for a grown person living at a different address where you share ownership of the asset.

 

[KennyPratt42]

Not a Tax Lawyer or a CPA, but:

Registration aside who is the buyer?
If financing is is involved who is carrying the loan?
If the answer isn't the person claiming, the tax credit then I think the action is suspect.

Recommend that you consult with Tax Lawyer or a CPA.

Both parent and child will be on the Bill of Sale with the dealership. Iowa on the vehicle registration form has has a place for Owner #1 and Owner #2 with separate D/L numbers and addresses with the option for either OR or AND on the title. It will be a cash sale so financing isn't an issue. Given the above I have worked under the assumption that either party could claim the federal tax credit on the vehicle (but obviously not both). I guess my question was when I've read through Form 8936 before the phrase "You are the owner of the vehicle." seems to only indicate a single owner, but I'm assuming in a situation like this one of the two parties should be able to claim the tax credit.

 

[KennyPratt42]

You've got a couple of things going on here. First, the tax credit, which is clearly answered already.

Second, use of the vehicle and insurance. I suggest you carefully consult with your insurance company, or your child's insurance company, as to proper title, registration, and insurance of a vehicle that is kept at two different addresses and driven by different people.

For example, titling a car to both people, but only one of them insures it. And the title can't be in the child's name, because the tax credit was claimed by the parent.

You also want to clearly understand your liability for a grown person living at a different address where you share ownership of the asset.

Fortunately both of us use the same insurance broker so working through that has been fairly straight forward and we both have a long history with the broker and insurance company for home, vehicle, and business related insurances for both of us.

 

[RickMachE]

Fortunately both of us use the same insurance broker so working through that has been fairly straight forward and we both have a long history with the broker and insurance company for home, vehicle, and business related insurances for both of us.

Sounds good. Too many people title their vehicle with a grown child, not understanding that they now share liability if that child gets into an accident, putting their assets at risk.

Example - 24 year old gets into accident, sued for $20million. Loses, they come after parent because vehicle is jointly owned.

 

[Bigfeets]

If you are the buyer (which is what k presume the dealer thinks you are), wouldn’t you be the one who has to take the tax credit? As the buyer, you are the registered owner at the sale I would think but then you would transfer the title ( like selling it)? Curious because if this were the case, we could all just slap down deposits galore and the bring in the “buyer” at the signing of papers and I would think dealers would not allow such a business transfer… these are my thoughts/questions, not my advice.

In the context of Ford's Price Protection policy, it's been said that PP could not be honored if the buyer was NOT the same person as the one who ordered the car. Since I am now owner of a Hyundai Ioniq 5 Ltd that I like a lot, I've been thinking I would buy my long-ago ordered MME at the 7 Dec 21 MSRP (before 2 price rises) and then gift it to a daughter sometime after the purchase which would qualify me for the full tax credit. (I don't know if I would have to wait any length of time before transferring title to her after I purchase the car.) I could also lease the car to her and still qualify for the Fed tax credit. Anyway, since I've been waiting 32 weeks without being scheduled, I've got time to think about it and decide on a course of action.

 

[Triggerhappy007]

In the context of Ford's Price Protection policy, it's been said that PP could not be honored if the buyer was NOT the same person as the one who ordered the car. Since I am now owner of a Hyundai Ioniq 5 Ltd that I like a lot, I've been thinking I would buy my long-ago ordered MME at the 7 Dec 21 MSRP (before 2 price rises) and then gift it to a daughter sometime after the purchase which would qualify me for the full tax credit. (I don't know if I would have to wait any length of time before transferring title to her after I purchase the car.) I could also lease the car to her and still qualify for the Fed tax credit. Anyway, since I've been waiting 32 weeks without being scheduled, I've got time to think about it and decide on a course of action.

Check with a CPA before gifting a car. Paying tax on that will eat up some of EV tax credit.

 

[bmwhitetx]

My son just picked up his car. Being a recent graduate his credit was not sufficient to finance the whole car. The dealer offered that I could co-sign or he could come up with more down payment. I said I would co-sign. When it came to paperwork, I asked if we could just put his name on title. They said no, we would be co-owners, because of the loan. So both names are on title and registration. He lives with us so also same address.
This may actually be good. His income was not going to be sufficient to get the full $7500 tax credit. Looks I could claim it now instead. I guess that also means I can drive it wherever I want .

Edit. Because he lives with us still we added him to our insurance policy. It was cheaper than a stand alone policy. Geico doesn’t assign drivers just wants to know which vehicle is owned by who. For his car I put both of us as owners. For my younger son, his beater is owned by my wife. He is just listed as a covered driver for all cars.

 

[RickMachE]

My son just picked up his car. Being a recent graduate his credit was not sufficient to finance the whole car. The dealer offered that I could co-sign or he could come up with more down payment. I said I would co-sign. When it came to paperwork, I asked if we could just put his name on title. They said no, we would be co-owners, because of the loan. So both names are on title and registration. He lives with us so also same address.
This may actually be good. His income was not going to be sufficient to get the full $7500 tax credit. Looks I could claim it now instead. I guess that also means I can drive it wherever I want .

I'd suggest you make sure to either consult a tax expert, or be really sure you know what you're doing. Specifically, since you contributed nothing to the payment of the vehicle, why would you be entitled to the tax credit?

As to whether your son can use the credit fully or not, make sure he's looking at tax liability, not tax owed. A common mistake.

You might also check with your insurance company regarding your new liability as an owner of the vehicle that your son drives.

 

[Bigfeets]

Check with a CPA before gifting a car. Paying tax on that will eat up some of EV tax credit.

Thanks for the comment. Paying what tax? (no Fed Gift tax if under current estate tax cap ~24M for couple, no gift tax in Cal, yet. IRS form 709)
I suppose the waiting time for the IRS tax "help phone line" is as long as the wait for my MME order to get scheduled.

 

[OWG]

Thanks for the comment. Paying what tax? (no Fed Gift tax if under current estate tax cap ~24M for couple, no gift tax in Cal, yet. IRS form 709)
I suppose the waiting time for the IRS tax "help phone line" is as long as the wait for my MME order to get scheduled.

I believe that the "Estate Tax" come into play when you are dead. You seem very much alive!

That very same IRS 709's instruction talks to a $15K annual exclusion. So that would leave at least $40K as taxable income to her if you gifted it to her.

I suppose that you could sell it to her for a dollar but she would still be on the hook for the capital gains. Gift Tax: Tax Rules to Know if You Give or Receive Cash (usnews.com)

The very complexity of the Tax Code is why you need to talk to a CPA.

 

[Bigfeets]

I agree about the advisability of getting "expert" advice. I don't want to give tax advice, so I shouldn't explain the current cap on the Estate Tax ($12M expires 2026) and its pertinence to gift giving while still alive. But basically the "excess over the annual limit ($40K in your example) has to be reported to the IRS using f709 because they keep track and count it against the cap. If I donated the MME to charity, I could deduct the "appraised" value of the car, but it doesn't seem like it would include the Cal sales tax I paid in buying the car in the first place unless appraiser included markup. I still don't know how long IRS expects me to "own" the car to qualify for the tax credit. It all gives me a headache, just like waiting 7-11 months before cancelling my MME order.

In Cal, the sales tax and the "value" tax on vehicle registration eat up a large part of the Fed tax credit. (Since I bought my Hyundai Ioniq 5 this year and claimed the California EV rebate, I could do it a second time with an MME purchase. However, Cal has dropped the income cap and reduced the rebate amount on the main EV incentive. Full Fed Tax credit seems assured at least through New Year's.)

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