I bought a clarity 5 weeks ago and an older retired relative wants to buy it off me. I suggested he buy new but he doesn't qualify for the federal credit. His proposal to me is to sell him my car for the price I paid minus 6500 thus netting me $1000. I would buy another clarity as my federal tax liability is over $15000. What are the chances irs rejects credit for the first car as I have resold it.
Federal tax credit and reselling car.
- Thread starter M. Shah
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KentuckyKen
Well-Known Member
I believe that that may be contrary to IRS tax code. I think I remember reading that you can’t claim the tax credit with the purpose of reselling the car. Whether or not your particular situation qualifies would be the sticking point. I strongly suggest you consult a certified tax expert and the pertinent IRS documents before proceeding.
Just my 2 cents.
Just my 2 cents.
MNSteve
Well-Known Member
Although presumably you did not buy the car with the intention of reselling, that is indeed what you are doing. Personally, I wouldn't do it. This is the kind of thing that the IRS could put in a computer algorithm and pop a red flag. It's beyond my personal threshold of "risky"; YMMV.
You did not buy it with the intent to resell it, and therefore by the letter of the law there is no issue.
Someone "made you an offer you couldn't refuse". The fact that you paid for the registration, insured the vehicle, and drove it for a period of time is contrary to purchasing for the purpose of reselling.
But, as others have said, you need to do what you are comfortable with.
Someone "made you an offer you couldn't refuse". The fact that you paid for the registration, insured the vehicle, and drove it for a period of time is contrary to purchasing for the purpose of reselling.
But, as others have said, you need to do what you are comfortable with.
thecompdude
Member
There are some tax implications too. You must have paid taxes when you bought the car. Your relative will have to reimburse you for the taxes and then pay tax again for his purchase.
Also not sure what your tax liability will be for the sale.
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Fast Eddie B
Well-Known Member
I agree.
1) The chances of an audit are infinitesimal anyway. No audit, no worries.
2) If one were audited, I firmly believe one could articulate exactly the fact pattern described in the OP and successfully make the case that the Clarity was not bought with the intention to sell shortly after taking ownership. That’s very different from buying with the intent to resell.
But IANATA*, so take my advice with a grain of salt. It goes without saying you should be skeptical of anything a Duc Rider tells you!
*I Am Not A Tax Attorney
Thank you guys for your replies. I slept over this and decided to tell my relative that I cannot do this. Here are my reasons.
1. If I sell him the car, I would probably buy the same Touring model (maybe a different color if I cannot get my color). The new car will be purchased right away and that might raise a flag with the IRS.
2. I could have easily justified buying another car besides a Clarity or even a Clarity in a different trim. Unfortunately Clarity only comes in base and touring and I am not buying a base.
3. Way too much risk to save maybe $1800 ($1000 from relative and the car can be had for $800 less than what I paid).
1. If I sell him the car, I would probably buy the same Touring model (maybe a different color if I cannot get my color). The new car will be purchased right away and that might raise a flag with the IRS.
2. I could have easily justified buying another car besides a Clarity or even a Clarity in a different trim. Unfortunately Clarity only comes in base and touring and I am not buying a base.
3. Way too much risk to save maybe $1800 ($1000 from relative and the car can be had for $800 less than what I paid).
fotomoto
Active Member
OK, that answers my question. You have no need or want to give up your specific vehicle. So, it seems to me you're taking all the risk while your relative is reaping all the rewards.
I would suggest you and your relative look at used Clarity's and see if that route make better financial sense/cents.
Yup thats what I am looking at. I could have easily justified selling the Clarity for any other car..Size/range/trim/owners remorse/uncomfortable/options. However if I am getting the same car/same trim/same color is a strict NO NO. I was trying to help my uncle but not worth it.
David in TN
Well-Known Member
I have a base model, that I purchased in 2018 and took the full tax credit when filing, and have considered trading for a Touring. I would definitely take the tax credit again on another one. Heck, I may trade each year to get the tax credit (we usually owe > $20K in federal tax each year.)
Isn't the purpose of the tax credit to get vehicles into the consumers hands?
What if I wanted to purchased one for each of four of us in my household? It might throw a red flag, but if I have a garage full of them, then what's the issue?
Just pondering possibilities.
Isn't the purpose of the tax credit to get vehicles into the consumers hands?
What if I wanted to purchased one for each of four of us in my household? It might throw a red flag, but if I have a garage full of them, then what's the issue?
Just pondering possibilities.
Man, everyone here is so cautious. How can this supposed IRS algorithm differentiate what you're doing from someone who just bought a Clarity for themself, then their spouse loved the car so much that they bought another? It's even more justifiable since it's a relative with whom you have fairly regular contact and a good relationship. If you're super paranoid, just keep the title in your name until the registration is up for renewal next year and the relative can just give you the cash as a gift.
fotomoto
Active Member
Worst case scenario: relative has a bad at-fault accident, lawsuit ensues, owner of car is sued.
Here in Texas, I had to agree to specific terms of not selling within a year to get the $2500 state credit. Will they check? No idea. Is my VIN flagged somehow? Seems easy enough to do (only 2,000 applications approved) in this day and age.
As MPower noted, look for leasing deals. By fall they may come back for the 2019s. During these specials, Honda passes on the entire federal rebate and state incentive to the buyer. Also, while you cannot end the lease early (without penalties), at any time, you can just pay the Honda the current buyout price (prorated towards the agreed to 3 year buyout) and just buy the car, or wait to the end of the 3 year period and either buy the car, or return it.
I am impressed that Honda (during the lease specials) provides a way for those who would not otherwise qualify for the fed tax incentive can buy at the same reduced prices. Also, there may be some additional bargaining room from the advertised price. They only offer these deals so far in certain states.
I am impressed that Honda (during the lease specials) provides a way for those who would not otherwise qualify for the fed tax incentive can buy at the same reduced prices. Also, there may be some additional bargaining room from the advertised price. They only offer these deals so far in certain states.
Fotomoto is correct. If I give my relative the car, I would transfer the title to him. If there is an accident I do not want to be liable.
The only way I see this would work if I get audited is if I buy a different color. I can say that the color was something we couldnt live with.
The only way I see this would work if I get audited is if I buy a different color. I can say that the color was something we couldnt live with.
In NY, if you sell before 3 years, you just (must) return the pro-rated part of the state incentive to NYSERDA. Then, they don't mind if you buy another EV right away and take another state incentive (but, the same 3 year rule re-starts from the next purchase date and applies again).
No such time of ownership rule for the fed tax incentive (other than not for re-sale as discussed above), however considering that these cars depreciate by $7,500 (or $3,500 where reduced for other mfgrs) the current fed tax amount for that model the minute you drive off the dealer lot, in general it is not like the person selling the car in the first year or two sees any advantage (with the possible exception of the early model 3s).
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