Anyone know whether the IRS considers any of the EV rebates to be taxable?

Discussion in 'Clarity' started by Texas22Step, Aug 17, 2018.

  1. Eddgie

    Eddgie Active Member

    Yes Craze1cars us correct...The federal tax credit is exactly that. If you own $9000 in taxes, when the credit is applied, your taxes would be reduced to $1500.

    If though, you only owe $5000 in taxes, you would only get $5000 of credit. You would not pay any taxes, but you would leave $2500 on the table.

    The state of Texas "rebate" though generates a 1099-MISC, and to the best of my knowledge, a 1099-MISC means that it is treated as income.

    The tax credit though is applied directly to the filer's federal income taxes owed. If they owe over $7500, they get to subtract $7500 from the bill, and if they own less than $7500, they don't pay any taxes at all (and if they had withholding, they would get all of that money as a refund).

    Absolutely a tax credit though. I just did my Turbo Tax and I filled out the 8936 tax form an it reduced my taxes by $7500.

    https://www.irs.gov/pub/irs-pdf/f8936.pdf

    I think though OKO may have been talking about the Texas rebate, which is fully taxable. You receive a 1099-MISC and that goes to the IRS as well, so the computer is going to match that to the filer's form and if the filer does not claim it, the IRS will send out a letter saying that it is taxes owed.
     
    Last edited: Jan 26, 2019
  2. oko

    oko Member

    That is right, I was not talking about $7500 tax credit. It was related to state rebates.

    At first I thought "look: this is a rebate for car purchase, it should not be taxable". But then it started to make sense. If rebates from third parties were not taxable, then every employer would pay employees "rebates" for their purchases instead of paychecks, which would not be federally taxable. Say I spent $1000 for groceries and $1500 for rent this month. And my employer gave me $2500 as a rebate (not paycheck) for these purchases. I should not pay taxes for this 2500, right? It is just a rebate!! :).
     
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  3. Alex0913

    Alex0913 Member

    Any estimation of how much one would pay in state taxes for a $2,500 rebate?
     
  4. petteyg359

    petteyg359 Well-Known Member

    That depends entirely on what state you're in. If you're talking about the Texas one, Texas has no income tax, so $0.
     
  5. 4sallypat

    4sallypat Active Member

    Anyone have info on CA CVRP tax rebate ($1500) and CA utility rebate ($1000) on IRS taxation ???
     
  6. petteyg359

    petteyg359 Well-Known Member

    Again, it's income. It will be taxed at whatever bracket you're in after deductions. Nobody but you accountant (or TurboTax, TaxAct, etc.) can tell you how much that will be.
     
  7. irwinr12

    irwinr12 New Member

    Sorry to raise such an old thread, but it's tax time again and I had the same question. A friend of mine received a 1099 form after buying an EV in Texas and we're trying to find a definitive answer to this question. It's kind of a rude surprise to get hit with an extra $550 in taxes were weren't expecting to have to pay.

    Except this is exactly how it works. When I book a flight to travel for my employer, they reimburse me for that expense, and that reimbursement is not taxable.

    Your employer can absolutely reimburse you for things that are business expenses and you don't pay income taxes on those reimbursements. Your rent is not a "business expense". But my employer reimburses me for my monthly cell phone bill, for instance, and that's not taxed.

    The IRS explicitly says that if the rebate comes from the manufacturer, it's exempt from income tax. Or if it's from a utility company: It's also exempt from income tax. I don't think the Texas Commission on Environmental Quality can be considered a utility though...
     
  8. oko

    oko Member

    Correct. TCEQ is not considered any, and you have to pay taxes on the $2500. Since they send you a 1099, and they send the same to the IRS, there is no question about this or escaping from this. If your CPA or somebody says otherwise, I'd advise not listening to them, now and then never :).
     
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  9. irwinr12

    irwinr12 New Member

    My CPA is still investigating. It *may* not be as clear cut as you think. I found this on JSTOR for example:

    Baillif, M. (2004). SALES PRICE ADJUSTMENTS: THE CONTINUING CONUNDRUM. The Tax Lawyer, 57(2), 571-591. Retrieved February 4, 2020, from https://www.jstor.org/stable/20772474

    The interesting section starts on page 585 titled "Rebates and Refunds". It seems to imply that any rebate that has "sufficient nexus to the original transaction, will represent rebates or refunds properly classified as sales price adjustments."

    I would argue that given all the requirements you have to meet to get the $2500 rebate would certainly qualify as "sufficient nexus to the original transaction."

    I am curious if anyone has actually reached out to the IRS on this?
     
  10. LegoZ

    LegoZ Active Member

    I paid taxes on this last year when I claimed it via the 1099 I was sent.
     
  11. oko

    oko Member

    Please share with us what your CPA finds out. I have to amend my 2018 taxes because of the EV charger anyway.
     
  12. LegoZ

    LegoZ Active Member

    If I remember correctly there is no federal credit for EVSE, is this for state?
     
  13. Alex0913

    Alex0913 Member

    I received the rebate from DEQ in Oregon for 2,500. I reached out to them since I haven’t gotten a 1099 and all they said was I should contact the IRS, which I will but I just wanted to add to this thread.
    My understanding is that I would report it as miscellaneous income. In doing research about this I found this on the TurboTax website from a person who got this rebate in California.
    https://www.google.com/amp/s/ttlc.i...xable-income-the-amount-is-2500/00/575761/amp
     
  14. DucRider

    DucRider Well-Known Member

    I sit on the DEQ advisory committee for the Oregon EV Rebate program. When I reached out to DEQ last February asking the director of the program if the rebate would generate a 1099, this is the response I got:

    No, the rebate is not taxable. We checked with Department of Revenue and they informed us the rebate is not taxable if it’s reducing the purchase price of an item. If a dealership offers the rebate for the electric vehicle or if DEQ issues the rebate check for purchasing the electric vehicle, it is not taxable because it is considered a price reduction and not income.
    Oregon's official position is (or at least was) that it is not taxable and no 1099's will be issued.

    The answer to this is very much going to be dependent on whom you ask. There are case studies and seeming IRS rulings on both sides. IRS publication 525 (https://www.irs.gov/pub/irs-pdf/p525.pdf) specifically states manufacturer rebates are not taxable because they simply reduce the purchase price.
    This is an example of a "two corner" transaction and is fairly clear.
    525 also specifically states that down payment assistance from a corporation for a home purchase is:
    a) A gift if it comes from a charitable organization, or
    b) a reduction in the purchase price if the corporation is not a charity
    This is an example of a "three corner transaction" and very similar to the issuance of a rebate check.

    The Oregon rebate is available as part of the purchase/lease transaction from participating dealers, and has a direct result of a purchase price reduction with no check being sent to the purchaser. It is fairly clear that at least these rebates would not be taxable. It may be that if you get the check later, it would be? Illogical on one level, but lawyers seems to thrive on that kind of thing. Kind of like rolling over an IRA - if you get the funds then immediately reinvest you'll get penalized. If they are sent directly to the new account you will not.


     
  15. Alex0913

    Alex0913 Member

    Thanks for the info! I am close to finishing my taxes on TurboTax and the Oregon rebate into is the only thing that I am waiting on. I asked the DEQ about the 1099 and they didn’t offer any info other than contact the IRS.
    DucRider, did you already get the rebate?
    If so, what are you doing tax wise? If you don’t mind sharing, thanks again!
     
  16. oko

    oko Member

  17. DucRider

    DucRider Well-Known Member

    Got the rebate. Will treat it like a reduction in purchase price
     
  18. Eddgie

    Eddgie Active Member

    The Texas rebate is 100% taxable at your regular tax rate.

    I bought my Clarity in Texas in 2018 and I got a 1099 on it, and if you get a 1099, that means it is income, and it goes into your gross income.

    Any time you get a 1099, you have to report it to the IRS. Any time a 1099 is issued to a citizen, the 1099 also goes to the Federal Government.

    Now in states where it is issued that have state sales tax, they may not consider it income, but Uncle Sam sure does.
     
  19. Electra

    Electra Active Member

    He may be in for another rude surprise when he finds out he'll have to pay self-employment tax on top of his tax bracket. I'm putting my numbers into TurboTax and putting that $2500 of 1099-MISC income is increasing the tax much more than $550. Great! Thank you IRS and TCEQ.

    Did you noticed you had to pay self-employment tax on that $2500? I also thought I would only pay my regular tax rate, but since that income is reported on the 1099-MISC, I'll have to pay self-employment on top of it.
     
  20. oko

    oko Member

    Of course you will NOT pay self employment taxes. This is clearly not self employment. I use taxact, and it asks some questions, and then it files this income as something else (don't remember what).
     

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