Taking advantage of the tax rebate to buy a new Clarity every year
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What trim and price did you pay before tax? I'm also in Dallas and think about doing the same.
Sloanhoo
Member
If you live in Oregon, California, or any other state with an EV credit program, there is a very high probability that your ability to do this will be severely limited. For example, Oregon requires you to hold the car 2 years. There is always risk of price depreciation (because your resale price is not guaranteed). If you just consider the federal tax aspects, you may be able to take the credit multiple times, until the manufacturer reaches 200k units sold, but your basis (accounting value of your investment) declines by the amount of credit you took, as well as depreciation. That means you owe capital gains tax on the total profit you made—including the tax credit. That could eat up any benefit of following this strategy. Pencil it out considering all the applicable costs and benefits before moving ahead, but it sounds to me like a lot of work for little net gain.
Not quite, but close.
The cannot require you to keep the vehicle. They can, and do, require prorated repayment if you don't keep it the stipulated amount of time. CA is 30 months, Oregon is 2 years. Oregon has an appeals process for hardship cases (military transfer, etc). Not sure if CA does.
NaughtyNeutron
New Member
I did not want to create a new thread but was looking for an answer regarding this similar topic.
Is the state tax rebate taxable at the federal level? I received a 1099misc from my state for my previous years purchase. Do I need to report this as income and hence taxable ?
Is the state tax rebate taxable at the federal level? I received a 1099misc from my state for my previous years purchase. Do I need to report this as income and hence taxable ?
That depends on who you ask.
Oregon is not issuing 1099's because they beleive it is not taxable. Other states are issuing 1099's because they believe it is.
If you received a 1099, a copy was sent to the IRS and not reporting it could create an issue at some point.
This is ridiculous, the buyer pays state tax on the car purchase to whatever state he/she resides in.
The dealership has nothing to do with your state tax.
Try buying a car from a dealer in California and driving it back to your home state. If it rolls off the lot, you’ll pay sales tax.
You will either need a dealers license and/or a dealer willing to provide a trip permit to drive it away without paying sales tax. I have indirectly purchased a vehicle from a California dealer by engaging the services of an Oregon dealer.
Washington is more cooperative. We purchased a vehicle from a dealer there and they issued a 3-day travel permit. Oregon has imposed a new vehicle tax of 1/2% on a vehicle with less than 7500 miles and weighing less than 26,000lbs. Otherwise, no sales tax.
For our California dealer delivered Clarity purchase in Oregon to be legitimate, the dealer had to transport the vehicle to Oregon and provide proof of a fuel purchase in the state of Oregon. It was for .9 gallons. We had to show proof of residence in Oregon and have a document notarized.
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I was completely wrong about this!
Landshark is absolutely correct that you pay sales tax in the state the deal closes (usually at the dealership).
As he stated, if the vehicle is shipped, then wherever the wheels touch the ground is the state the deal closes.
If there is no shipping involved and the resident state and the dealership state have reciprocity, then the resident's state, where the vehicle will be registered, offsets the amount paid to the seller's state.
If no reciprocity, then it is possible that tax may have to be paid twice.
This was an eye opener.
Landshark is absolutely correct that you pay sales tax in the state the deal closes (usually at the dealership).
As he stated, if the vehicle is shipped, then wherever the wheels touch the ground is the state the deal closes.
If there is no shipping involved and the resident state and the dealership state have reciprocity, then the resident's state, where the vehicle will be registered, offsets the amount paid to the seller's state.
If no reciprocity, then it is possible that tax may have to be paid twice.
This was an eye opener.
It looks like this varies by state. When I went to NY and bought my Clarity, I paid sales tax in MI, not NY. Dealer said that is how it is done in NY and MI secretary of state seemed to expect that too.
Robert_Alabama
Well-Known Member
Yes, varies by state, with California seeming to me like it is the most painful. I have bought cars in Mississippi and Georgia, then registered them in Alabama. No sales tax paid in Mississippi or Georgia, sales tax paid in Alabama when registered. In California, it seems to take a near act of congress to avoid paying sales tax there on the purchase, even if you are registering it out of state. It seems like it is very possible you could be charged sales tax again when you register it in your home state, since it seems most states expect that no sales tax would have been paid in state of purchase.
CA does their best to take/keep money from non-residents (as well as residents).
I won a contest in CA last year, and since it physically took place in CA they withheld State income taxes on the prize money. I'm still trying to figure out if it is worthwhile to file a non-resident tax return and if I would get any/all they withheld back. It's only $210, but at some point it is the principal.
TurboTax wants another $50 for a second State, so it means downloading the forms and doing them the old fashioned way. California does not make the forms available on the web, you have to email them and request them (they did email them to me almost immediately).
HagerHedgie
Member
I thought Your tax liability has nothing to do with it. I think it’s a straight up credit Like EIC. You can have a negative tax rate. I did for a few years with 3 kids, college tax credits and a weak income. My worst was about -9%. Being broke sucks even worse than paying taxes.
Anyway I leased it and let the dealer take the credit so I didn’t have to wait for it.
Sent from my iPhone using Inside EVs
It is a "Non Refundable" Credit and is limited to your tax liability in the year you place the vehicle in service. Any excess amount will not be refunded or roll over to subsequent years.
And the dealer never gets the credit (unless they also own a finance company and you lease thru them and not Honda Financial Services)
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The above was based on reading CA state DMV law.
Here's another plot twist: I called the California DMV today and asked if I (MA resident with no plans to move) had to pay CA state tax on a new car at a CA Honda dealership and they said "the dealership can sell the new car in CA and get MA registration for me and there would be no CA tax due, just MA tax and I can take a road-trip home".
I guess I'll call a few dealerships to validate that one way or the other......
I just traded in my 2019 Clarity for a brand-new 2020 Clarity. I spent about $7900 out of pocket for the transaction. With the $7500 federal tax rebate and the $1000 utility rebate from SCE, I expect to make more than $500 from trading in the car. Not several thousands as I hoped, but not bad for a couple hours of work.
Did you get the CVRP on the 2019? If so, then you will need pay back a prorated amount (requirement is to keep it for 30 months).
Rebate recipients who do not retain the eligible vehicle for the full 30-month ownership or lease period will be required to reimburse CARB all or part of the original rebate amount.
- Vehicle purchaser or lessee is required to notify the Administrator to arrange for early termination of vehicle ownership in advance of intent to sell, return, or terminate a lease prior to the required 30-month ownership period.
- CARB will periodically check vehicle identification numbers with vehicle registrations to ensure that CVRP applicants meet this requirement. If an applicant violates this requirement, CARB or its designee reserves the right to recoup CVRP funds from the original vehicle purchaser identified on the rebate application form and may pursue other remedies available under the law.
Since Pennsylvania sends a 1099, I reported it and paid tax on it. It's not worth the trouble with the IRS to not.
I just double checked and SCE does have a 20 month ownership requirement and a claw-back clause. Since I owned the previous car for 9 months, I'll have to return $550 of the rebate. This means that I just about broke even with the second transaction. Probably will still be a net positive if I negotiated harder.