Tax Credit for Dummies - Need Advice!

[godfodder0901]

No limit for the Federal credit. Some local/state credits (like WA state) are limited based on the total cost of the vehicle.

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[TyrusRex]

No limit for the Federal credit. Some local/state credits (like WA state) are limited based on the total cost of the vehicle.

Thanks! I'm in Texas so I don't have state tax to deal with. I remember a big debate about the feds raising the limit to $80,000 but wasn't sure if it went through. Of course, at my age I have CRS so I thought I'd look it up and then can't find it anywhere.

I verbally locked in my configuration this morning and have been scrambling to see if I need to change my configuration before I sign anything to get down to $75,000. I'm happy to know that I can stick with it, as is.

Thanks again.

 

[Max]

Thanks! I'm in Texas so I don't have state tax to deal with. I remember a big debate about the feds raising the limit to $80,000 but wasn't sure if it went through. Of course, at my age I have CRS so I thought I'd look it up and then can't find it anywhere.

I verbally locked in my configuration this morning and have been scrambling to see if I need to change my configuration before I sign anything to get down to $75,000. I'm happy to know that I can stick with it, as is.

Thanks again.

The only limits I know of are in different versions of the new proposal, none of which has passed as of now. My understanding is you are good for $7,500

 

[mabowden]

You're misreading the refund statement.

Most people buying a rivian will have paid over $7500 in taxes.

That quote means if you only paid 6000 in taxes over the year, the IRS isn't going to cut you a check for the additional 1500.

You're essentially getting your 7500 back from what they took out in federal income tax over the course of the year.

I considered myself to be a "smart tax payer" and did not know this. Thanks for the explanation. For some reason I thought that I would have to edit withholdings to reap the total $7500 benefit.

 

[DuckTruck]

Please forgive me if someone else has already mentioned this. I've read elsewhere about somebody not having the $7,500 worth of Federal tax liability in the year of their purchase to allow them to take full advantage of their EV incentive. If someone is retired, or beyond 59½ and doesn't have the income to generate $7500 in Federal tax liability, there are several ways one could go about generating that liability.

Of course one could simply sell enough appreciated stock to generate more taxable income, but that isn't the only route you could go. If a tax-deferred investment account (traditional IRA or 401K plan) is available, it may be a good time to withdraw enough from it to generate the needed tax liability. You could then simply transfer the withdrawn funds into a retail account and reinvest them in the same stock, if desired. We use these tax-deferred accounts to hold off on having to pay taxes, but if your Rivian wants to help take care of your tax payment to the Feds, I say let it do so.

An advantage of doing this is that once you've sold a given stock and incurred your full marginal Federal tax rate, any growth in the replacement stock could trigger only long-term capital gains, if held long enough. That could ultimately allow a given investment to result in a lower overall tax hit from beginning to end, while also allowing one to fully capture their EV incentive.

I know there are IRS rules as to the length of time needed between selling and then re-buying the same stock to create a tax liability, but it would be a shame for anyone to miss out on any part of the available $7,500 incentive.

As always, best to consult a tax professional before messing around in the dirty underworld of the rules and regulations swirling around taxation. I keep hoping the entire Tax Code will be released in English one day. I'm not sure what language it's currently written in, but reading IKEA assembly instruction pamphlets is comparatively way more fun. ?‍?

 

[timesinks]

I know there are IRS rules as to the length of time needed between selling and then re-buying the same stock to create a tax liability, but it would be a shame for anyone to miss out on any part of the available $7,500 incentive.

This is only for deductible losses. You can harvest all the gains you want and immediately repurchase with no consequences.

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