EV tax credit counting toward capital gains?

SuperRob

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That's why it says "credit so allowed." Based on that, it looks like once IRS accepts a return with an EV credit, any sale of that vehicle should carry a cost basis of the original price minus the allowed credit.
Possibly. Could also be forward-thinking, since in the future, the credit will be at POS, in which case it does reduce the price paid. Could be some of that wording was in anticipation of that changing for 2024.
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kennethjk

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It says, '... you may have to ...' not that you must. There is some other criteria there that line is considering. Gotta love vague tax code.

The problem is that even if you claim the credit, it's not refundable (at least, not this year). So some people may not actually 'get' all of that $7500; it depends on your tax liability. There is no reasonable way to reduce your tax basis on an asset ... at least, not in the same year when you don't know what that will be until you've done all the calculations, and even then, that credit will keep adjusting every time you go back to redo the cap gains on it, further reducing the realized credit.

This is why think we're overthinking this.
No one ever said the tax code was always logical but if you read code section 30D, it discusses the basis reduction. IRS instructions arenā€™t always correct nor perfectly clear and the code or regulations are a better guide..
 

Neil4Real

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I don't think you understand the original question. It's not about whether OP can claim the credit, it's whether OP need to reduce the cost basis (what they paid) on the vehicles they sold by the amount of the credit for capital gains purposes.

It's an interesting question I've not yet seen a clear answer on.
How is it an interesting question? The tax credit has been around for almost 2 decades in one form or another, yet you cannot find a single other post, discussion, anything on people saying they've had to reduce their cost basis because of the EV tax credit. You most certainly would have seen this come up somewhere if that was the case.

You simply do not.
 

JRSNoVa

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How is it an interesting question? The tax credit has been around for almost 2 decades in one form or another, yet you cannot find a single other post, discussion, anything on people saying they've had to reduce their cost basis because of the EV tax credit. You most certainly would have seen this come up somewhere if that was the case.

You simply do not.
Before recently it was typical for cars to depreciate significantly as soon as the ink was dry on the purchase agreement. It didn't matter how a gain on the sale of the car was treated because almost none had gains.

Add in the recent changes to the laws governing the credit and its tax treatment and it's clear that the previous two decades of experience is no longer relevant. So yes, it is an interesting question.
 

nvabill

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You better claim it as a capital gain and pay the tax on it just to be careful. It's the right thing to do!
 


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I think your tax guy is correct in this. Nearly no one considers the loss on a vehicle or the gain as a capital gains issue but in reality law suggests that they should. It would be treated the same as a piece of art is. Buy a Lamborghini for 100,000 and sell it for 200,000 a few years later and you are supposed to report the gain. In normal cases you would take a loss offset by the usage to calculate and neither anyone does this nor does the IRS puruse anyone. But the law suggests that you should. None of this is tax advice.
Wrong. Cars don't get a write off for less sell any more than if you sell it for more.
 

ChuckA

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Just remember the phrase ā€œI didnā€™t knowā€. You wonā€™t receive a 1099B on the sale so IRS isnā€™t notified.

If the Escape wasnā€™t bought as an investment itā€™s a casual sale and not subject to capital gain taxes.

Anyway, technically the gain, if any, is rolled over into its replacementā€™s basis as a like-kind exchange.

All rebates are price reductions and not taxable income.
 

Mach1E

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Right, I think on the Escape buyback, itā€™s not an applicable ā€œrecapture eventā€ in which case the basis reduction does not get applied. It is worded ā€œmay have toā€ because basis reduction only applies in the cases of applicable recapture events.
Itā€™s pretty clear you donā€™t like your CPAs answer because it means you owe more taxes.

While the tax code is sometimes vague, unclear, grey and even sometimes contradictory, this comes down to one of the simplest parts of the tax code:

Did you make money???

If the answer to that question is ā€œYES,ā€ then the government will tax you on it.

And as others have posted, the $7500 tax credit is very clearly part of your basis calculation.

Itā€™s not the answer you want to hear, but itā€™s the answer.

Now how many people who sold their used cars for a profit in the last few years will note it on their taxes? Iā€™m guessing the number rounds to zero.

Unless youā€™re a car dealer, selling used cars for a profit just isnā€™t something you come across normally.
 

ChuckA

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You better claim it as a capital gain and pay the tax on it just to be careful. It's the right thing to do!
Itā€™s a casual sale and not reported to the IRS.
 

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Wrong. Cars don't get a write off for less sell any more than if you sell it for more.
Not going to pick a fight with you but you are wrong. You would need to calculate your basis and report either gains or losses on a vehicle. No one actually does it because it normally results in a loss with the calculation because who ever makes money on a vehicle.
 

nvabill

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Itā€™s a casual sale and not reported to the IRS.
Please elaborate on that one, I donā€™t know what a casual sale is.
 

Shelbeast

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Not going to pick a fight with you but you are wrong. You would need to calculate your basis and report either gains or losses on a vehicle. No one actually does it because it normally results in a loss with the calculation because whoever makes money on a vehicle.
I looked up the tax code (short and long term). You are correct. My bad. It appears the IRS does not monitor it closely unless it's an obvious pattern or one gets audited. Of course, the rich have the loophole means to avoid it.

Cheers!
 

kennethjk

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Itā€™s a casual sale and not reported to the IRS.
Casual sales many times apply to sales tax

i am not aware of a casual related to the sale of personal property as it pertains to a car.

maybe a garage sale but generally things are sold at less than purchase price.

so again, read the code.
 

kennethjk

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Not going to pick a fight with you but you are wrong. You would need to calculate your basis and report either gains or losses on a vehicle. No one actually does it because it normally results in a loss with the calculation because who ever makes money on a vehicle.
you are correct that you have to calculate gains and losses on a vehicle but a loss on personal property is not allowed. Gains on the other hand are reported and taxable.
 

ChuckA

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Casual sales many times apply to sales tax

i am not aware of a casual related to the sale of personal property as it pertains to a car.

maybe a garage sale but generally things are sold at less than purchase price.

so again, read the code.
I agree that persons should seek tax advice outside of the forum but the tax code is unreadable.

As a retired accountant with 48 years experience I would myself not report it.
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