Federal tax credit and reselling car.

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.

 

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.

 

If you are uncomfortable, maybe your relative could lease the car with the dealer giving him credit for the $7,500 tax credit that the dealer would take.

There are several threads that deal with this issue.

 

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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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

 

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.

 

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.

 

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.

 

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.

 

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).