Changes to the tax credit is in the works

[carbonizedbrett]

So you are saying that if claim more allowances to withhold fewer taxes and that creates a bill due to the Fed that the tax credit from the EV will not offset the tax bill?

I think he misunderstood your original post.

If I'm understanding correctly, what you're saying is that you'll lower your federal tax withholdings for 2021 in anticipation of claiming the $7,500 tax credit when you file your taxes in early 2022.

That should work if your year-to-year tax situation is reasonably stable.

There's no reason to give the money to the government now so they can give it back you next year!

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[timbop]

So you are saying that if claim more allowances to withhold fewer taxes and that creates a bill due to the Fed that the tax credit from the EV will not offset the tax bill?

No. The amount withheld from your paycheck has ZERO to do with how much tax liability you actually have. Your tax liability is based on your income and deductions/allowances. Taking the BEV tax rebate out of it: when you take more withholdings from your paycheck than your tax liability, you get your own excess money back at tax time. If your witholdings are less than your tax liability, you have to write the IRS a check for the difference.

All that the BEV rebate does is reduce the amount of your tax liability by up to $7500; the same rules apply for over or under paying witholdings.

 

[timbop]

well said. yes, that's what I was trying to say

 

[Brian707]

You really need to do better research. In 2010, it was estimated that 47% of the US population doesn't pay federal income taxes. The majority of those are under 18 or senior citizens (live on social security). The majority of households pay taxes.

Exactly. But this old wives tale has been beaten into the heads of people for years by a certain cable news network and a recently deceased radio blowhard so they think it's true. The tax credit is good, it's people getting THEIR money back from income they paid in taxes. Not to get political but the tax system in this country currently benefits the super wealthy and not the poor, middle class, or even upper middle class. 70 years ago the income tax cap was something like 60% now its 33% on the wealthiest Americans. I'm not saying it needs to go up to those levels for multi millionaires bur I just chuckle when people mention the 47% of Americans who don't pay taxes. They still pay too large of a percentage of their income in taxes in other ways like sales tax for instance

 

[Orangefirefish]

You miss the point. It is not to help well-off people buy cars, it's to help well-off people to decide to buy EVs instead of ICE cars. You block them from getting the credit/rebate/whatever, many will stick to ICE cars. The government wants to encourage R&D, so the other option is to do government bids with specs for fleets of vehicles. Then only a few companies "win" the contract and they have to deal with whiner law suits of those not selected...

Not saying it's perfect, but the reality is it could be worse going with some of your ideology assuming the goal is to have more EVs replace more ICE vehicles, and not to redistribute more wealth at the cost of less EVs on the road. Which are you optimizing for?

I’m not a big fan of the government getting their hands dirty meddling with private sector business but that looks to be the status quo. I don’t think EV owners don’t need any more convincing to buy another EV. In the current setup I think any credit could be optimized by being directly tied to the vehicle it replaces. Trade in an ICE, get a fixed credit, like conquest cash. The idea being to incentivize owners take the lousiest, heaviest polluting vehicles off of the road in exchange for an EV. Not every vehicle needs to be a BEV right now, but it would be hugely helpful to get the worst offenders off the road first. As much as it benefits some, I think it’s a bit silly to incentivize EV owners to get another EV unless it’s replacing an ICE. Getting an F-150 Lightning to go with my Mach E does very little in terms of environmental impact, if anything it’s worse because of all the manufacturing, mining, and future battery waste concerns. As is proposed right now there’s no limitation on EV owners or those that have already gotten a credit before, so that F-150 Lightning is looking like a no brainer for me, and the only thing it would do is result in less miles on the Mach E. Limiting the credit to once per taxpayer lifetime is a good idea too.

 

[timbop]

I’m not a big fan of the government getting their hands dirty meddling with private sector business but that looks to be the status quo. I don’t think EV owners don’t need any more convincing to buy another EV. In the current setup I think any credit could be optimized by being directly tied to the vehicle it replaces. Trade in an ICE, get a fixed credit, like conquest cash. The idea being to incentivize owners take the lousiest, heaviest polluting vehicles off of the road in exchange for an EV. Not every vehicle needs to be a BEV right now, but it would be hugely helpful to get the worst offenders off the road first. As much as it benefits some, I think it’s a bit silly to incentivize EV owners to get another EV unless it’s replacing an ICE. Getting an F-150 Lightning to go with my Mach E does very little in terms of environmental impact, if anything it’s worse because of all the manufacturing, mining, and future battery waste concerns. As is proposed right now there’s no limitation on EV owners or those that have already gotten a credit before, so that F-150 Lightning is looking like a no brainer for me, and the only thing it would do is result in less miles on the Mach E. Limiting the credit to once per taxpayer lifetime is a good idea too.

Wouldn't that then motivate BEV owners to buy a cheaper ICE next time they get a car?

The right way to accomplish your goal is to reward the behavior you want and punish the behavior you don't. That means a one-time credit for ICE being replaced by BEV AND also additional taxes on ICE vehicles proportional to their CO2 output. There's no way in hell legislation like that would pass, however.

 

[jlauro]

I’m not a big fan of the government getting their hands dirty meddling with private sector business but that looks to be the status quo. I don’t think EV owners don’t need any more convincing to buy another EV. In the current setup I think any credit could be optimized by being directly tied to the vehicle it replaces. Trade in an ICE, get a fixed credit, like conquest cash. The idea being to incentivize owners take the lousiest, heaviest polluting vehicles off of the road in exchange for an EV. Not every vehicle needs to be a BEV right now, but it would be hugely helpful to get the worst offenders off the road first. As much as it benefits some, I think it’s a bit silly to incentivize EV owners to get another EV unless it’s replacing an ICE. Getting an F-150 Lightning to go with my Mach E does very little in terms of environmental impact, if anything it’s worse because of all the manufacturing, mining, and future battery waste concerns. As is proposed right now there’s no limitation on EV owners or those that have already gotten a credit before, so that F-150 Lightning is looking like a no brainer for me, and the only thing it would do is result in less miles on the Mach E. Limiting the credit to once per taxpayer lifetime is a good idea too.

Lots of good ideas, and I am not a fan of government meddling either. Most ideas have a downside too, so hard to say which are better or worse than the current and proposed legislation.

Limiting per trade in would help optimize. Although that only helps if the trade in isn't resold, and if it was in good shape it's a lot of waste in production to send it directly to scrap... Getting a F-150 Ligtning to replace an ICE F-150 would do a lot of good, so proposals that limit based on class are not good (except maybe ICE to EV in same/similar class trade-in). The other bad side of requiring a trade in is that new generation would most likely still be purchasing ICE because they are significantly cheaper and that's all they can afford. Limiting to once per tax payer has problems too, but one good side is it could also apply to used vehicles which would help the lower income.

Rebates are the carrot. In some ways I think a stick approach might be better. A luxury or co2 carbon tax on ICE vehicles and/or fuel. That could help pay for the EV rebates and would make the supply issues even worse for EVs.

 

[Racing_Andy]

It's from a Wind Energy site, but I'm not sure if their the originator. It's complex but otherwise very well laid out. https://www.windtaskforce.org/profi...y-efficiency-and-co2-of-gasoline-and-electric

Good stuff, thanks!
I hadn't given it much thought, but the electricity generation mix certainly drives whether a BEV is lower emissions than a hybrid. This department of energy site lets you pick different states to see the generation mix and its effect on emissions. The scale will continue tipping towards BEVs as the grid gets cleaner over the next decade.
https://afdc.energy.gov/vehicles/electric_emissions.html

 

[Orangefirefish]

Wouldn't that then motivate BEV owners to buy a cheaper ICE next time they get a car?

The right way to accomplish your goal is to reward the behavior you want and punish the behavior you don't. That means a one-time credit for ICE being replaced by BEV AND also additional taxes on ICE vehicles proportional to their CO2 output. There's no way in hell legislation like that would pass, however.

Perhaps, but I feel like there is the kool-aid aspect, once you go EV, unless you had a problem with the lifestyle, it’s going to be hard to go back. And yes, the most objective way would be pay to pollute, in which case right now oil and gas gets the upper hand, not good. Silly that anyone gets subsidies at all, especially with an industry that has such strong inelastic demand.

 

[llinthicum1]

Giving tax credits are kind of a gimmick and misleading. Depending on your income and tax situation, a $7,500 tax credit means you can receive between $0 and $7500 deduction when you file your returns. So, if you purchase a vehicle in 2021, you won't know what you'll receive as a tax credit until 2022 when you file your 2021 taxes. It would be more straight forward if the manufacturer would either reduce the price or give a rebate when the vehicle is purchased.

 

[jlauro]

Giving tax credits are kind of a gimmick and misleading. Depending on your income and tax situation, a $7,500 tax credit means you can receive between $0 and $7500 deduction when you file your returns. So, if you purchase a vehicle in 2021, you won't know what you'll receive as a tax credit until 2022 when you file your 2021 taxes. It would be more straight forward if the manufacturer would either reduce the price or give a rebate when the vehicle is purchased.

Assuming no major changes in income and expenditures, 90% of the people should know (or can ask their accountant / tax service) based on the previous years taxes. Unless most of your income isn't taxed, such as taking out of a pretaxed retirement fund, and you can afford a Mach E, chances are you will get most if not all the credit...

That said, I agree it would be much better if the rebate was up front and applied to everyone. The lower cost vehicles (ie: bolt), a larger portion of people will not owe enough in taxes, and this shouldn't be biased against those with lower tax obligations or those that have retired. Allowing to carry forward the rebate to future tax years (as can be done with solar) could help, although not as much as making the rebate up front at the dealer.

 

[88 KILOWATTS PER HOUR]

At minimum the government should convert the tax credit into a fully refundable credit.

Better yet, it should be an instant point-of-sale rebate.

 

[88 KILOWATTS PER HOUR]

I agree. And it’s an interesting topic worthy of debate. But it’ll get closed eventually ??‍

 

[88 KILOWATTS PER HOUR]

I’m not a big fan of the government getting their hands dirty meddling with private sector business but that looks to be the status quo. I don’t think EV owners don’t need any more convincing to buy another EV. In the current setup I think any credit could be optimized by being directly tied to the vehicle it replaces. Trade in an ICE, get a fixed credit, like conquest cash. The idea being to incentivize owners take the lousiest, heaviest polluting vehicles off of the road in exchange for an EV. Not every vehicle needs to be a BEV right now, but it would be hugely helpful to get the worst offenders off the road first. As much as it benefits some, I think it’s a bit silly to incentivize EV owners to get another EV unless it’s replacing an ICE. Getting an F-150 Lightning to go with my Mach E does very little in terms of environmental impact, if anything it’s worse because of all the manufacturing, mining, and future battery waste concerns. As is proposed right now there’s no limitation on EV owners or those that have already gotten a credit before, so that F-150 Lightning is looking like a no brainer for me, and the only thing it would do is result in less miles on the Mach E. Limiting the credit to once per taxpayer lifetime is a good idea too.

I like the idea of giving people a credit or rebate towards their new EV, if they are trading in an ICE vehicle to get it. It could sort of work like Cash For Clunkers, but it would be rebranded for EVs. I propose calling this new program ‘Gifts For Gas Guzzlers’. Or simply, ‘Gifts 4 Guzzlers’.

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