voltamps
Posts: 149
Joined: Thu Dec 17, 2020 6:13 pm
Delivery Date: 14 Dec 2020

Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 21, 2021 6:45 am

(This was off-topic in another thread recently.) I recently sold a 2020 Leaf at 4,900 miles and 7 months after buying it and getting Fed & State tax credits. The used car market is hot right now, and I did well, we'll Leaf it at that.

Somebody thought the IRS would want their $7.5K back, since I only had the car 7 months after buying it.

I did read some Tesla Model 3 threads about this topic.
**** If you recall, when the first people who reserved the Model 3 started getting theirs around 2018, many just pocketed the tax credits and simply sold the car real quick, in some cases a few days after registering theirs, for a profit on the open (hot) market for new Model 3's.

Somebody in the thread said the IRS just didn't want business dealerships buying an EV and flipping it quickly in their inventory, pocketing the Fed tax credit and making a profit on the sale. Indeed, I can't find anywhere a private owner got attacked by the IRS for selling their new Model 3 quickly.

Here are references from the actual Tax Code & form instructions for reference:

from https://www.irs.gov/irb/2009-48_IRB
also https://www.irs.gov/instructions/i8936
and 26 U.S. Code § 30D - New qualified plug-in electric drive motor vehicles:

(2) The original use of the vehicle commences with the taxpayer;

(3) The vehicle is acquired for use or lease by the taxpayer, and not for resale;


I can't find any mention of any IRS (or Colorado State) tax law or form instructions that say anything about selling a vehicle (private seller) before 1 year has elapsed.

Then, wbusch, this person's first post, drops this "insider info" (presumed) about the possible future for the EV Tax Credit:
wbusch wrote:
Tue Jul 20, 2021 2:00 pm
The IRS has proposed regs that suggest you must recapture 100% of the credit if it was sold within the first year. Second year 66 2/3% and third year recapture is 33 1/3%
in the present time, I guess the IRS can sort of "interpret" the "not for resale" portion of their Tax Code as a 1-year requirement. They have been known to throw around interpretations freely when attacking some people in the past, just letting the person defend themselves with personal expensive lawyers, while leaving the fed gov paying for the IRS's time pursuing it. Doesn't usually happen that way, but the IRS is notorious.
2020 Leaf SV - sold - I'll get another EV later...Reserved the irresistible Maverick Hybrid, here in a few months
2016 Ford Focus Electric (traded in at 34k miles, 5 years)

Learjet
Posts: 164
Joined: Tue Mar 24, 2020 8:04 pm
Delivery Date: 11 Mar 2020
Leaf Number: 309454
Location: Louisiana, USA

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 21, 2021 10:28 am

I'm no expert...but... the limitation on resale would make sense in the same tax year vs 1 year from purchase date
2019 Nissan Leaf SL Plus
Build Date 2/19...car sat new for 1 year until I purchased 3/20

goldbrick
Posts: 1304
Joined: Tue Aug 01, 2017 3:33 pm
Delivery Date: 01 Aug 2017
Leaf Number: 311806
Location: Boulder, CO

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 21, 2021 2:21 pm

I'm no expert either but I think the answer would be in the text of the statute that authorized the rebate. And/or the statutes referenced therein, etc, etc. and in any prior court precedents, etc, etc.

Or more simply, has anyone ever heard of anyone being denied the credit or having trouble with the IRS because of it? It may have happened but I don't recall ever hearing of any instances of that and I would guess there have been multiple instances of folks arbitrating the tax rebate and selling their new EV for an immediate profit.

voltamps
Posts: 149
Joined: Thu Dec 17, 2020 6:13 pm
Delivery Date: 14 Dec 2020

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 21, 2021 4:09 pm

Learjet, makes sense. I could think of some logical, fair rules on this. I was wondering what the IRS actually feels about it all.

goldbrick, The very famous case of the first 10,000 Model 3's that came in to people on the reservations list was well known to the IRS. Many people pocketed the market-demand induced price increase once they registered & drove their new Model 3 for about a week in some cases, selling it very soon after buying it, for profit. Never heard of the IRS going after any of those very visible cases. There would have been some internet whining for sure if it did happen.
2020 Leaf SV - sold - I'll get another EV later...Reserved the irresistible Maverick Hybrid, here in a few months
2016 Ford Focus Electric (traded in at 34k miles, 5 years)

Learjet
Posts: 164
Joined: Tue Mar 24, 2020 8:04 pm
Delivery Date: 11 Mar 2020
Leaf Number: 309454
Location: Louisiana, USA

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 21, 2021 7:39 pm

looking back at my tax return...this might help www.irs.gov/Form8936 ...Edit...link not working...but google that form and instructions...
2019 Nissan Leaf SL Plus
Build Date 2/19...car sat new for 1 year until I purchased 3/20

voltamps
Posts: 149
Joined: Thu Dec 17, 2020 6:13 pm
Delivery Date: 14 Dec 2020

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Thu Jul 22, 2021 6:15 am

Learjet wrote:
Wed Jul 21, 2021 7:39 pm
looking back at my tax return...this might help www.irs.gov/Form8936 ...Edit...link not working...but google that form and instructions...
That was in the original post above. Looked at all of that. No general guidance, IRS "advice", not even any vague reference to any Time Period. So far, the leading theory is that the IRS would only object if you're a used car dealership or some broker of some kind. Not private individuals. ... Any inside info from an IRS official who reads these threads, or a Tesla Model 3 ex-owner flipper now in jail, is welcome.
2020 Leaf SV - sold - I'll get another EV later...Reserved the irresistible Maverick Hybrid, here in a few months
2016 Ford Focus Electric (traded in at 34k miles, 5 years)

Triggerhappy007
Posts: 154
Joined: Tue Jan 01, 2019 8:08 pm
Delivery Date: 01 Jan 2019

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Thu Jul 22, 2021 7:44 am

Don't worry, you're fine. The IRS won't come after you for that.
2020 Leaf Plus SV Tech & All Weather
2019 Leaf SL - traded in
2020 Pacifica Hybrid Limited AST

wbusch
Posts: 2
Joined: Fri Nov 20, 2015 6:00 am
Delivery Date: 19 Nov 2015
Leaf Number: 312388
Location: Bowie, MD

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 28, 2021 8:55 am

The IRC Treas Reg 1.30-1(b)(2)(i) state that you only have to recapture the tax credit if it ceases to be used as an electric vehicle.

(2) Recapture event -

(i) In general. A recapture event occurs if, within 3 full years from the date a qualified electric vehicle is placed in service, the vehicle ceases to be a qualified electric vehicle. A vehicle ceases to be a qualified electric vehicle if -

Example 8
Examples. The following examples illustrate the provisions of this section:

Example 1.
A, a calendar-year taxpayer, purchases and places in service for personal use on January 1, 1995, a qualified electric vehicle costing $25,000. On A's 1995 federal income tax return, A claims a credit of $2,500. On January 2, 1996, A sells the vehicle to an unrelated third party who subsequently converts the vehicle into a non-electric vehicle on October 15, 1996. There is no recapture upon the sale of the vehicle by A provided A did not know or have reason to know that the purchaser intended to convert the vehicle to non-electric use.

Thus no recapture when selling the car to be used as an electric vehicle by the new owner.

nlspace
Posts: 407
Joined: Mon Jun 05, 2017 10:21 pm
Delivery Date: 06 Jun 2017

Re: Paying Back the Fed $7500 Tax Credit if Selling a Leaf?

Wed Jul 28, 2021 10:51 am

that's a great find--thanks for sharing.

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