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Discussion Starter · #1 ·
And what if one were to take delivery today, in December of 2022? With a pre-8/16/22 binding contract in hand—$3,750 or $7,500?

There’s been a lot of speculation—and a great lack of clarity—about how exactly the tax credit phase-out for Toyota [reducing maximum tax credit for their EV’s to $3,750 as of 10/1/22] would actually apply to BZ4X’s with binding contracts dated prior to 8/16, but with actual delivery only occurring now, or in the coming weeks.

Despite the new legislation/"Inflation Reduction Act" EV stipulations, it seems that under the IRS’s “transition rule” (Plug-in Electric Drive Vehicle Credit Section 30D | Internal Revenue Service), for tax purposes, the rules that will apply to those who already had binding contracts on undelivered but qualifying vehicles will be as if the car had been sold prior to enactment of the bill (on August 16th).

If this is their full interpretation, then the entire $7,500 credit is surely on the table, as the first tax credit phase-out for Toyota had not concluded at that time, with the phase-out having actually concluded on 10/1/22:


Although in the above link, the IRS’s use of the word ‘acquired’ [date] on their qualifying vehicles muddles things; what does 'acquired' actually mean within this context, and in the broader context of the transition rule?

Hence the consideration that if for the purposes of the phase-out only, the IRS decides to go with the actual physical acquisition date of the vehicle, then the tax credit phase-out for Toyota would indeed apply (and for only a couple of months a for only a few very unlucky people). That said, it would be very illogical if the IRS followed their ‘transition rule’ in this instance for the North American assembly requirements in the bill, but ignored it in the case of the phase-out rules (of course complicated by the fact that there is an awkward 4-month gap in the implementation of the new phase-out rules).

However, if they did in fact interpret the two aspects of rebate qualification as mutually exclusive, then would taking delivery after 12/31/2022 be the safest bet—assuming a BZ4X under pre-8/16 binding contract—since it would result in a delivery/purchase/'acquisition' date at a time when all phase-outs had been reset (i.e., manufacturer production phase-outs are to be eliminated/reset under the new legislation, commencing 1/1/2023).

Does anyone have any current insights?
 

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I don't think anyone can tell you for sure right now. To simplify your analysis:

The wording of the law states that it is treated as if it were put in service on the day before enactment of the law, which would get you the full tax credit. The IRS guidance says it follows the rules from before the enactment, which would give you half. Neither interpretation would reinstate the full credit for next year if it's not available for this year.
 

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"placed in service" date will always be before 8/16/2022 with a written binding contract. It's in the new law.

The question has always been.... whether the IRS has a new form all allows you to claim the 2022 car (delivered in 2023 or 2024 or 2025...for cases like Fisker Sports or Rivians) in later tax years.

FYI.. the old phase out rules provided one quarter at 100% then two quarters at 50% and two more at 25% The new IRA law basically tosses those out on 1/1/2023 when the quotas disappear. I believe Ford hit 200K and technically are in the phase out (100%) quarter. It's all moot because the quota disappears in 15 days.
 

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"placed in service" date will always be before 8/16/2022 with a written binding contract. It's in the new law.
I've always wondered how to handle "treat such vehicle as having been placed in service on the day before the date of enactment".

Sounds like you believe that you would enter 08/15/2022 on the tax form, right? That had been my thought, too, but I also wonder if that will send up a red flag when a different date from the dealer/Subaru is submitted with the VIN.

Theoretically, that would allow us to claim on our 2022 taxes a car that is delivered before Tax Day in 2023. (Or later, with an extension or amendment.) That would be best case scenario. Assuming the car eventually gets delivered...

Edit: Just realized I'm on bZ4X forum. So, change Subaru above to Toyota and also add that I think the tax credit would still be $7,500 because 08/15 was before Toyota's credit was cut in half.
 

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So I was wondering if anyone heard anything further on this yet. I'm doing my taxes and Turbotax specifically asks if you had a binding contract and if yes, it says to change the "Placed in Service" date to 8/15/2022. When I leave my "Acquired date" at 12/10/2022, when I actually got the car, it calculates me a $3,750 credit... which is probably how it SHOULD work... HOWEVER, the top of the page says "Your qualified plug-in electric drive must be placed in service in 2022, and the date acquired can be no later than the date placed in service". When I change both dates to 8/15/2022 it obviously shows me a full $7,500 credit. If I try to advance with the Date Aqcuired as 12/10/2022 and the Date Placed in Service as 08/15/2022 I get a red error message saying "The Date Placed in Service must be in 2022 and no earlier than the Date Acquired. You can remove this vehicle if it was not placed in service in 2022."

Really not sure what to do here.. if I go by the instructions then I guess I get the full 7500 because it says it can't be acquired later than its put in service... Would love some clarification on this.. I'd hate to send up red flags and get audited over them being clear as mud with the instructions.
 

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I suspect EVERY EV tax credit claimed for 2022 will be a red flag for a audit by the IRS…
I feel they are fully expecting a shit show this year when it comes to EV credits but I don't know how deep they're gonna look in to them or if they are just kinda gonna move on and look forward to next year..lol I'm not trying to pull one over on anyone, I just want what I qualify for...but at the same time I don't wanna leave money on the table if I was supposed to get it either.
 

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Certainly, if you qualify, then by all means go for it, as long as you have valid qualifications.

Still, I suspect the IRS is gonna lean heavily on anyone claiming tax credits from EV purchases. As a test of curiosity (I also use TurboTax), I may do a preliminary test return calculation taking the credit just in order to see what risk the TurboTax “audit-meter” estimates the odds of an audit shows.

I won’t actually claim a credit when I file, since I know I don’t meet the qualifications.
 

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Certainly, if you qualify, then by all means go for it, as long as you have valid qualifications.

Still, I suspect the IRS is gonna lean heavily on anyone claiming tax credits from EV purchases. As a test of curiosity (I also use TurboTax), I may do a preliminary test return calculation taking the credit just in order to see what risk the TurboTax “audit-meter” estimates the odds of an audit shows.

I won’t actually claim a credit when I file, since I know I don’t meet the qualifications.
I figure I'm probably already at risk anyway since I got the EV credit last year (ID.4) and will have 2 this year... My EV6 and then the bZ4X in whatever amount it ultimately qualifies for since I had a binding contract pre Aug 16th. Then again, 15k might be a lot for me but its small potatoes in the grand scheme of things so who knows. In the past if I missed something, the IRS just sent me a bill like a year later, didn't even bother to audit.
 

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I figure I'm probably already at risk anyway since I got the EV credit last year (ID.4) and will have 2 this year... My EV6 and then the bZ4X in whatever amount it ultimately qualifies for since I had a binding contract pre Aug 16th. Then again, 15k might be a lot for me but its small potatoes in the grand scheme of things so who knows. In the past if I missed something, the IRS just sent me a bill like a year later, didn't even bother to audit.

I think a lot of people are going to be surprised.

As for the Treasury Department, they had advice that came out around 12/30/22, that basically said they would rule on the whole battery materials by March... Although, they did reaffirm that the IRA states that as of 1/1/23. the car MUST be final assemble in the USA. (this automatically disqualifies the Toyota bZ4X!) The IRS had similar warnings, and basically said, in uncertain language that a Binding Agreement won't mean anything (sure your lawyer could argue otherwise, but when it comes to the IRS, their final wording and ruling will stand,... for some reason the IRS doesn't have to follow the law).

Anyway, here is some wording/advice:

IRS: Credits and Deductions Under the Inflation Reduction Act of 2022 | Internal Revenue Service

Purchase date vs. delivery date
If you entered a written binding contract to buy a vehicle before August 16, 2022, but took possession on or after August 16, 2022, and before January 1, 2023, you may claim the credit based on the prior rules and disregard the assembly requirement.

If you purchased a vehicle between August 16, 2022 and December 31, 2022 but don't take delivery of the vehicle until 2023, see Credit for New Clean Vehicles Purchased in 2023 and After.

* FINAL ASSEMBLY IN THE USA * is still a rule, regardless of your binding agreement.



**I Did find one loophole, that the IRS hasn't closed up, yet!... and in the IRA it states that if you LEASE the car after 1/1/23, the assembly rule doesn't apply, and the same, if you purchase it under a business name (business purchase).... For me, i'm hoping this wording doesn't change all year, because that's exactly what I ended up doing... Senator Machin though is fighting to get that wording changed! he stated "that defeats the purpose of the bill... "




added note for @Neutronbomb .... You would have to have a huge taxable income to qualify for that many credits in one year!
 

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I think a lot of people are going to be surprised.

As for the Treasury Department, they had advice that came out around 12/30/22, that basically said they would rule on the whole battery materials by March... Although, they did reaffirm that the IRA states that as of 1/1/23. the car MUST be final assemble in the USA. (this automatically disqualifies the Toyota bZ4X!) The IRS had similar warnings, and basically said, in uncertain language that a Binding Agreement won't mean anything (sure your lawyer could argue otherwise, but when it comes to the IRS, their final wording and ruling will stand,... for some reason the IRS doesn't have to follow the law).

Anyway, here is some wording/advice:

IRS: Credits and Deductions Under the Inflation Reduction Act of 2022 | Internal Revenue Service

Purchase date vs. delivery date
If you entered a written binding contract to buy a vehicle before August 16, 2022, but took possession on or after August 16, 2022, and before January 1, 2023, you may claim the credit based on the prior rules and disregard the assembly requirement.

If you purchased a vehicle between August 16, 2022 and December 31, 2022 but don't take delivery of the vehicle until 2023, see Credit for New Clean Vehicles Purchased in 2023 and After.

* FINAL ASSEMBLY IN THE USA * is still a rule, regardless of your binding agreement.



**I Did find one loophole, that the IRS hasn't closed up, yet!... and in the IRA it states that if you LEASE the car after 1/1/23, the assembly rule doesn't apply, and the same, if you purchase it under a business name (business purchase).... For me, i'm hoping this wording doesn't change all year, because that's exactly what I ended up doing... Senator Machin though is fighting to get that wording changed! he stated "that defeats the purpose of the bill... "




added note for @Neutronbomb .... You would have to have a huge taxable income to qualify for that many credits in one year!
I got my bz4x limited on 12/28/22 in California where Iive. The vehicle was final assembled in Japan and and just filed my 2022 tax via Turbotax. Confirmed no tax return from state or federal buying bz4x last December :(. Since I live in CA, I got $2K check from Clean Vehicle Rebate Project, which was quick and easy, and now waiting for a decal sticker from DMV. I am not sure if there are any bz4x final assembled in the USA. Aren’t they all final assembled in Japan?
 

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Discussion Starter · #15 ·
I got my bz4x limited on 12/28/22 in California where Iive. The vehicle was final assembled in Japan and and just filed my 2022 tax via Turbotax. Confirmed no tax return from state or federal buying bz4x last December :(. Since I live in CA, I got $2K check from Clean Vehicle Rebate Project, which was quick and easy, and now waiting for a decal sticker from DMV. I am not sure if there are any bz4x final assembled in the USA. Aren’t they all final assembled in Japan?
Yes, they are all assembled in Japan, but the IRS allows filers to disregard the country of origin stipulation in the new iteration of the law if they had a binding contract antedating its signing (i.e., <8/16/22). In other words, if the vehicle in question qualified for the rebate prior to the new legislation, and you already had contractual obligations and a significant deposit/down-payment on a given vehicle, then the most prevalent interpretation at this time is that if you took delivery before the end of 2022, you can apply for the rebate on your '22 return.
 

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Yes, they are all assembled in Japan, but the IRS allows filers to disregard the country of origin stipulation in the new iteration of the law if they had a binding contract antedating its signing (i.e., <8/16/22). In other words, if the vehicle in question qualified for the rebate prior to the new legislation, and you already had contractual obligations and a significant deposit/down-payment on a given vehicle, then the most prevalent interpretation at this time is that if you took delivery before the end of 2022, you can apply for the rebate on your '22 return.
Thank you for your response on this. I saw this as well. The tricky thing about this car is that Toyota had recall earlier in 2022 and stopped selling it until October 2022 here in the US. Whoever got this car before 8/16/22 had their car recalled and suggested not to drive or return the vehicle (customers in Japan).


It’s the first fully EV from Toyota in the US for recent years. I didn’t expect much in terms of tax refund when I bought this car. I needed a Toyota car with an exciting new technology. Hope this car doesn’t give me headaches like my previous 2019 Lexus ES Hybrid. No more Lexus for me for a while. So far, I am enjoying this car!
 

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Discussion Starter · #18 ·
Thank you for your response on this. I saw this as well. The tricky thing about this car is that Toyota had recall earlier in 2022 and stopped selling it until October 2022 here in the US. Whoever got this car before 8/16/22 had their car recalled and suggested not to drive or return the vehicle (customers in Japan).


It’s the first fully EV from Toyota in the US for recent years. I didn’t expect much in terms of tax refund when I bought this car. I needed a Toyota car with an exciting new technology. Hope this car doesn’t give me headaches like my previous 2019 Lexus ES Hybrid. No more Lexus for me for a while. So far, I am enjoying this car!
Indeed; for the purposes of the tax credit, the wheel bolt recall really complicated things for BZ4X customers. Ironically, for the small number of customers with early pre-orders, but who'd not yet taken delivery of the vehicle—the Inflation Reduction Act (and subsequent changes to the tax credit) ended up helping us more than it hurt us.

By stipulating that vehicles with pre-8/16 binding contracts could claim their vehicle as entering into service on the day before the act was passed, it ostensibly protected the full tax credit for us, despite the vehicles not being released from recall until 1-2 months after Toyota's first credit phaseout would have commenced [under the old legislation].

That said, for future customers, the new legislation really made the vehicle much less competitive price-wise, unfortunately.
 

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Thank you for your response on this. I saw this as well. The tricky thing about this car is that Toyota had recall earlier in 2022 and stopped selling it until October 2022 here in the US. Whoever got this car before 8/16/22 had their car recalled and suggested not to drive or return the vehicle (customers in Japan).


It’s the first fully EV from Toyota in the US for recent years. I didn’t expect much in terms of tax refund when I bought this car. I needed a Toyota car with an exciting new technology. Hope this car doesn’t give me headaches like my previous 2019 Lexus ES Hybrid. No more Lexus for me for a while. So far, I am enjoying this car!

I'm assuming from this conversation that you did NOT get a binding agreement on or before 8/16? (had you gotten this, your take delivery date of 12/28, would have given you a tax credit of $3875. This would also mean you had enough taxable income).

thoughts?
 

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I'm assuming from this conversation that you did NOT get a binding agreement on or before 8/16? (had you gotten this, your take delivery date of 12/28, would have given you a tax credit of $3875. This would also mean you had enough taxable income).

thoughts?
No binding agreement as I decided to buy the car on 12/28/22 and came home with the vehicle on the same day.
 
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