Will my SE still quality for tax credit

Somewhat relatedly, based my accountant spouse's recent experience, increased federal funding has clearly enhanced the IRS's capabilities.

 

The previous IRS guidance indicated the deposit had to be at least 5% of the value of the EV to be considered binding.

Now the deposit just has to be significant. In our personal case, we had “significant” but not 5%


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Not sure it has changed much, but at least it doesn't explicitly state the 5% downpayment example anymore. ‍♂️

I think the amount people put down as a downpayment or deposit was a sticking point for many since a lot of times it was in the hundreds versus the thousands (i.e., less than the 5% example the IRS once stated in the description of a binding contract)

[note: after posting this I saw that P&T essentially said the same thing... sorry for the duplicate-like post]

 

To me that seems like a distinction without a difference. You're still at the mercy of an auditor's interpretation, as well as the specific laws of your state.

[Where I live, a contract doesn't have to be written to be considered legally binding - a verbal commitment is apparently sufficient. However, I wasn't willing to bet $7500 that the IRS would agree.]

 

Taking Teslarati’s earlier post (#156) at face value, the previous guidance had this language:

What Is a Written Binding Contract?
In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract.​

One might argue that, if the only change was to remove the only illustrative compliant example, then the most recent guidance neither lowered nor raised the standard. Alternatively, call me crazy, I might argue that a 5% down payment, in the absence of that illustrative language, might be tougher to characterize as being “significant.” [If I only had 5% of my “honey-do” list completed, my wife would hardly call that “significant” progress. ]

 

Naw...this whole thing was from 2013 for the five percent safe harbor for renewable energy projects. It's just copypasta from the last decade.

 

The IRS doesn't get to define what a legally-binding contract is or isn't. What they can do (and are doing here) is offer guidance on what indicates to them the presence of a legally-binding contract. More of a "this is what we like to see" than a "this is what is and isn't".

The IRS is enforcement... the cops, if you will. Your life will be easier if you don't upset the cops, but the law is written in legislative bodies and interpreted by judges & juries; not the cops.

 

Any updates on this? Where have people landed? I did put down a down payment in March and got the car on September 3rd. Turbotax seems to think i am good but forced me to change the service date to 08/15/2022….

 

Yep, that's what you're supposed to do; "put in service" date gets adjusted to 8/15, the day before the new legislation was enacted (signed).

 

Same thing happened to me - I think you did it right. I put my down payment in May and got the car in Sept. too but I had to change the service date as well. I feel bad for people trying to buy after August 15th because I don't think it'll qualify.

 

Ok so my accountant handled it by using my actual in service date (8/30/2022), but adding this footnote in the “Federal Statements” section of my filing:


FORM 8936: CLIENT ENTERED INTO WRITTEN/BINDING CONTRACT ON 8/8/2022 TO
PURCHASE NEW, QUALIFIED PLUG-IN ELECTIRC VEHICLE.


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