[Cap10Alden]

Since I'm a newbie to the EV market, I was surprised to recently learn that any tax incentive on eligible EVs is a tax "credit" against liabilities, and can only be used to reduce your tax liability to zero. With this said, if I am considering an outright purchase of the Ocean and taking advantage of the Federal $7,500 credit then it appears I need to change my current tax deductions, which usually cover my liabilities within a +/- $1,000, so that I increase my FY 2023 tax liability in order to take advantage of the full amount of the credit. Besides changing my deductions are there any other ways, besides the obvious of earning more money, that would increase my current tax liability at the end of next year, or does anyone know of an online tool to help?

Also, am I correct in assuming if I decide to lease the Ocean, then Fisker will receive the tax credit, but they are not legally obligated to pass this savings on to the lease by way of a reduction in lease price?

 

[S7davis]

In order to get full credit you need 7500 in tax liability. And if doing the flexee lease the bank gets the credit. However I thought I read cool years ago if using flexee lease they will apply the 7500 to cost of car or lease so no need to put in the 3k initiation fee.

 

[Cap10Alden]

More to this point...
IRS does not issue a refund/check for a EV tax credit.
“You'll often hear that a credit is worth "up to" a certain amount. "Up to" is the critical modifier. The federal incentive is usually referred to as a flat $7,500 credit, but it's only worth $7,500 to someone whose tax bill at the end of the year is $7,500 or more. Let's say you buy a Nissan Leaf or other eligible EV and you owe $4,000 in income tax for a particular year. That's all the tax credit will be. Uncle Sam's not writing a refund check for the other $3,500. And an unused portion of the credit can't be applied against the following year's taxes. This is because the electric vehicle tax credit is nonrefundable. It can bring your federal tax bill to zero, but it will not stack on to a potential tax refund.”

So I guess my question, which should have been worded differently, is as follows: Does anyone know of any tax strategies to be able to take full advantage of the EV incentive?

 

[UltraVol]

More to this point...
IRS does not issue a refund/check for a EV tax credit.
“You'll often hear that a credit is worth "up to" a certain amount. "Up to" is the critical modifier. The federal incentive is usually referred to as a flat $7,500 credit, but it's only worth $7,500 to someone whose tax bill at the end of the year is $7,500 or more. Let's say you buy a Nissan Leaf or other eligible EV and you owe $4,000 in income tax for a particular year. That's all the tax credit will be. Uncle Sam's not writing a refund check for the other $3,500. And an unused portion of the credit can't be applied against the following year's taxes. This is because the electric vehicle tax credit is nonrefundable. It can bring your federal tax bill to zero, but it will not stack on to a potential tax refund.”

So I guess my question, which should have been worded differently, is as follows: Does anyone know of any tax strategies to be able to take full advantage of the EV incentive?

Cap0Alden you are correct about the current EV tax incentive law in that you can take "up to" a $7,500 tax "credit" and that credit would be used to offset any tax liability you might have up to or less than the $7,500 incentive. Also, your purchased vehicle must "qualify" for the incentive. For instance, Tesla and GM vehicles do not qualify since they have long ago exceeded selling their 200,000 maximum allowable EV units. I understand Toyota and Nissan are about to reach the 200,000 threshold. However, it is also my understanding that the Fisker Ocean will qualify for the current incentive. There are some other nuances within the current law about income limitations, etc. that you might want to check out.

Please understand that I have no expertise tax law or this particular aspect of the law whatsoever. That said, I would not do anything right now to affect your tax status since any maneuvers you might need to make to generate some tax liabilities in order to take advantage of the current tax incentive on EVs needs to be done in the year that you purchase the EV. Of course, for Ocean buyers, it looks like next year would be the time to get positioned to generate the liabilities to offset the available credits. Sounds like I'm most likely in a similar situation as you in terms of not having any tax liabilities to offset with the credits. I just discussed this exact subject with my wealth management advisor this week. We determined that the only thing we could think of in our (wife and I) case would be to convert our traditional IRAs over to a Roth. We will have to get with the CPA in order to determine exactly how much of our current IRAs that we will need to convert over to a Roth IRA to generate a tax liability of $7,500. None of this will be done unless, and/or until, we end up getting the Ocean or any other qualifying EV.

As you may or may not be aware, there is still a slim chance that Congress might end up passing the "Climate Portion" of the earlier proposed BBB bill. I doubt this legislation will ever get passed unless it could somehow get done before the mid-term elections this year while the Democrats have their current slim majorities in Congress. I'll give you a link to an article that deals with this proposed legislation. If this were to get passed, we wouldn't need to be concerned about the tax situation that exists now since the BBB legislation would turn the EV incentive into a tax "refund" instead of a tax "credit" which any American taxpayer would be able to take advantage of the incentive regardless of their tax status. Now wouldn't that be nice! Here is a link you can read if you need to know more: Considering an electric car? The Build Back Better bill could save you thousands - CBS News

 

[MTN Ranger]

I've done two $7500 EV tax credits in the last ten years. It was really easy to do using TurboTax online.

 

[UltraVol]

I've done two $7500 EV tax credits in the last ten years. It was really easy to do using TurboTax online.

By the way MTN Ranger, you were correct about the traditional to Roth IRA conversion to generate the needed onetime tax liability. That's all my financial guy could come up with in order to take advantage of the current tax credit based on my limited tax exposure scenario. He wasn't really savvy on the tax laws that relate to the EV incentives, so I had to educate him. I really believe that I was the first one to ever approach him with this subject. Now he knows. Will probably come in handy for him in the future as more people begin to acquire EVs.

 

[TT97]

Since I'm a newbie to the EV market, I was surprised to recently learn that any tax incentive on eligible EVs is a tax "credit" against liabilities, and can only be used to reduce your tax liability to zero. With this said, if I am considering an outright purchase of the Ocean and taking advantage of the Federal $7,500 credit then it appears I need to change my current tax deductions, which usually cover my liabilities within a +/- $1,000, so that I increase my FY 2023 tax liability in order to take advantage of the full amount of the credit. Besides changing my deductions are there any other ways, besides the obvious of earning more money, that would increase my current tax liability at the end of next year, or does anyone know of an online tool to help?

Also, am I correct in assuming if I decide to lease the Ocean, then Fisker will receive the tax credit, but they are not legally obligated to pass this savings on to the lease by way of a reduction in lease price?

Your current deductions are irrelevant to getting the full $7,500 credit. The key is that your tax liability needs to be north of $7,500 to get the full $7,500. For reference, your tax liability is Line 24 of your Form 1040 for 2021. As long as that figure is larger than $7,500; you will get the full credit. Of course, you can always adjust your deductions if you prefer to spread the credit over the year instead of getting a larger return in 2024.

If your tax liability is less than $7,500; there are ways to increase your liability (such as converting an IRA to a Roth IRA) or you can look into leasing in which case the bank gets the $7,500 credit (and should pass the credit on to you in the financing). As others have said, if you do need to increase your liability, talking to an accountant is advised.

 

[BayouCityBob]

Your current deductions are irrelevant to getting the full $7,500 credit. The key is that your tax liability needs to be north of $7,500 to get the full $7,500. For reference, your tax liability is Line 24 of your Form 1040 for 2021. As long as that figure is larger than $7,500; you will get the full credit. Of course, you can always adjust your deductions if you prefer to spread the credit over the year instead of getting a larger return in 2024.

If your tax liability is less than $7,500; there are ways to increase your liability (such as converting an IRA to a Roth IRA) or you can look into leasing in which case the bank gets the $7,500 credit (and should pass the credit on to you in the financing). As others have said, if you do need to increase your liability, talking to an accountant is advised.

This is exactly right. Just to reiterate your point in a different way:

Let's say you earned $80,000 and your total federal income tax was $15,000 after deductions
Let's say you already had payroll deductions that equalled $15,500 so even if you had not purchased any sort of EV you would be getting a small $500 refund.
You then claim the $7,500 tax credit and your refund will jump to $8,000.
This is how it works. As long as your total income tax liability for the year was $7,500 or more you get the full thing. If it is less, then you get whatever your liability was. If you had $6,500 you get $6,500 and so forth.

 

[Blu Angel]

I've done two $7500 EV tax credits in the last ten years. It was really easy to do using TurboTax online.

Darn it, Canadian EV buyers only get the $5000 Federal EV rebate
If you’re fortunate enough to live in Quebec, you will receive an extra $7000 (April 1, 2022?)
and British Columbia province residents still get an additional $3,000

Ontario residents are SOL but hopefully there will be a provincial government
change this June 2022 to a EV friendly Liberal or NDP government

 

[joceppi85]

I have been researching other EV incentives. It seems current manufacturers of EVs are enrolled with various state incentives besides the federal tax credit. I am not finding Fisker as a participating manufacturer yet even though Fisker produced the Fisker Karma in 2012. I am in CT and this is the information I received from the CT EV incentive:

Thank you for your email and interest in the CHEAPR program. For a vehicle's eligibility to be considered for the rebate program, the Original Equipment Manufacturer of the vehicle must contact us directly. We are unable to add a new vehicle to the list based solely on a consumer's request. If the vehicle is deemed eligible, the vehicle will be added to the CHEAPR Eligible Vehicle list. Please see our Implementation Manual for full details regarding vehicle eligibility guidelines. ​

Thank you again for your interest and please do not hesitate to reach out to me with any other questions or concerns that you might have.​

Best regards,​

Carmen DeSoto (She/her/hers)​

Rebate Processing Specialist, CHEAPR​

Center for Sustainable Energy® ​

(877) 426-2474 office​

Learn more about our mission to decarbonize at EnergyCenter.org​

How does one find out if Fisker will participate with the state EV incentives? All the news I have read so far is about federal tax incentives. Any insight is appreciated.

 

[Bernie]

Darn it, Canadian EV buyers only get the $5000 Federal EV rebate
If you’re fortunate enough to live in Quebec, you will receive an extra $7000 (April 1, 2022?)
and British Columbia province residents still get an additional $3,000

Ontario residents are SOL but hopefully there will be a provincial government
change this June 2022 to a EV friendly Liberal or NDP government

We didn't get the change of gov, but we did get the increase in maximum eligible EV prices. Fisker will fall into those brackets for sure but it would be nice if they would bump up the rebate. I can't believe Quebec gets an additional $7k.

 

[Blu Angel]

@Bernie

we did get the increase in maximum eligible EV prices. Fisker will fall into those brackets for sure but it would be nice if they would bump up the rebate.

Wonderful news about the EV price increase…So Ocean Ultra will be covered by the EV program

 

[Bernie]

@Bernie

Wonderful news about the EV price increase…So Ocean Ultra will be covered by the EV program

Very very likely. Can't see the Ultra trim being priced over $70kCDN. And remember the options you add don't count towards the price maximum. It's just the trim starting price.

 

[Blu Angel]

@Bernie

Can't see the Ultra trim being priced over $70kCDN

Hooray!
This simplifies my getting the Fisker Ultra in Canada
and Fisker Sport in Australia (2nd reservation)