Tax planning

IRS logoAs we’re about to enter the final quarter of the year, thoughts turn to the holidays and then…tax season. This year and next planning is especially important. The three top producers of plug-in vehicles, that qualify for the full $7,500 Federal Income Tax Credit for all-electric and plug-in hybrid vehicles will probably hit their 200,000th unit sale in 2018. Depending on the modeling you employ, this could start happening as early as mid-year or closer to the end of 2018.

For the uninitiated, there is an income tax credit for those who buy (not lease) all-electric and plug-in hybrid vehicles. But not all vehicles get the same tax credit. The amount of the tax credit is determined by the size of the battery pack. Also, it is important to understand the difference between a tax deduction (like the deduction for having a child, property taxes paid or mortgage interest paid) and a tax credit.

A tax deduction is a deduction off your income, so if you have a deduction, with a value of $2,000, it reduces your taxes by the deduction multiplied by your tax rate. It’s a little more complicated than that, due to how tax brackets affect the calculations, but this example is close enough for horseshoes or hand grenades. If your tax bracket is 25%, the tax deduction of $2,000 only reduces the taxes you owe by $500 ($2,000 X 25%).

A tax credit actually reduces your income tax by the stated amount of the credit. So, in the example above we used a value of $2,000. A tax credit would of that amount would reduce your taxes by $2,000. Easy, peasy. There are some other considerations, so consult your tax preparer.

The plug-in vehicle income tax credit phases out for a manufacturer’s vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which the 200,000th of their plug-in vehicles has been sold. Qualifying vehicles from that manufacturer are eligible for 50 percent of the credit ($3,750) if purchased in the first two quarters of the phase-out period and 25 percent ($1,875) of the credit, if purchased in the third or fourth quarter of the phase-out period.  After that point, the credit goes away completely.

Who are the three manufacturers that will be affected first? They are Nissan ( maker of the Leaf), Tesla Motors (maker of the Roadster, Model S, Model X and Model 3) and General Motors, (maker of the Cadillac ELR & CT6, Chevy Volt, Bolt EV and Spark EV).

So, in planning your taxes, if you want to make a purchase in 2017 and collect the tax credit when you file in 2018, you need to be working on that purchase now. If you want to order exactly what you want, it’s too late for a Tesla, since their waiting list is so long. For the current GM models, you should place your order no later than October 15th, as it usually takes eight weeks from order to delivery (depending on dealer allocation). Unfortunately, I do not know what the order cycle is for the newly redesigned Nissan Leaf.

If you want to make a purchase in 2018 and collect the tax credit when you file in 2019, you need to keep an eye on how the manufacturers are each progressing toward the 200,000 vehicle limit. As of last month, it shaped up like this:

  • Tesla Motors – 138,469
  • Nissan – 113,263
  • General Motors (Cadillac and Chevrolet) – 149,649

The Tesla numbers were based on estimates. I will endeavor, over the next year, to keep an eye on this and post my findings here.

Will the EV income tax credit punish the pioneers?

We’re approaching the 7th anniversary of mass-produced plug-in vehicles. Although the $7,500 income tax credit was expected to get 1,000,000 plug-in vehicles on the road quickly, we’re only about 2/3 of the way there, in the U.S. market. As of the end of last month, there were 686,192 plug-in vehicles that had been sold, in the U.S. Every single year, sales have increased. We are on track this year to possibly hit the 200,000 unit mark for the first time in a single year (depending on how December goes). December, due to year end sales promotions and the nearness to tax time, is always a very high production month.

This got me thinking about the pioneers and the stragglers.

The tax credit begins to go away, once a manufacturer sells their 200,000th plug-in vehicle. Three manufacturers are already well over 100,000 units sold: Tesla Motors, General Motors and Nissan. These are the manufacturers that paved the way for all the newcomers we’ve been reading about, with great expectation. However, they may be punished for their risk taking. When these three manufacturers hit the magic 200K units, the newcomers will have a distinct price advantage, as their customers will still be able to get the full tax credit, while the customers of the more established PHEV manufacturers will suddenly lose half the tax credit, a few months later 3/4 of it and shortly after that, all of it.

My question: Was this the strategy of the stragglers?

In the darker places of my mind, I can see a boardroom, where the executives are saying, “Let them take the risk! We can sit back and see how things develop. If PHEVs take off, we’ll be late to the game, but we won’t have paid the price of educating the consumers about them. Better yet, when the other guys lose the tax credit, we’ll have an amazing price advantage over them, giving us a huge leg up, into the market!”

I have complained about the implementation of the tax credit before. There were so many ways it could have been a much better tool to stimulate sales. It probably would have been a better stimulus, if the tax credit had been available until the total sales of all PHEVs in the U.S. reached a benchmark. For instance, if the goal of one million PHEVs had also been used as the end of the tax credit, the incentive would be to ramp up production much more quickly. To the bold would go the spoils! Stragglers would have the same tax credit available, but by dragging their feet, fewer of their vehicles would have qualified for it, because the pioneers would have gobbled much of it up. There would have been a race to produce quickly. Instead, we seem to have incentivized caution and failure to innovate.

I’m proud of the risks taken by the Big Three of PHEVs, but I am concerned about how they’ll fare, once they lose the tax credit and have to compete with competitors who have prices thousands of dollars lower than what they can successfully provide.

Disclaimer: I have had five Chevy Volts in my household. I love the Volt & Bolt EV (and Spark EV, Cadillac ELR, Tesla Model S, etc) so much, I changed careers to promote them. Part of my concern is definitely self-serving: How will I be able to sell, once the playing field is so badly tilted against me?

National Drive Electric Week 2017 #NDEW2017

It’s that time of year again: It’s National Drive Electric Week! Well…actually, it starts on September 9th and goes through the 17th. As bookends to the week, I will be at the NDEW2017 gathering at Grapevine Mills Mall on Saturday, September 9th. Form 10:00AM until noon, there will be a gathering of plug-in vehicle owners, supporters and the EV-curious. It’s a;ways a good time and I’ll have the Chevy Bolt EV and Volt with me.

On the last day of NDEW2017, Sunday the 17th, I will have Bolt EVs at “Run with the Sun,” in Irving, Texas. At that event, I plan to take people on test drives. There’s nothing like “butts in seats” to prove how great EVs are!Run with the SunI hope to see you at these great events!

Chevrolet’s eAssist Silverados arrive in Texas

eAssist at Electric AveThe 2017 eAssist Silverados have begun arriving. They are all Crew Cab LT Silverados with V8 engines and a battery pack about 1/10 the size of the Volt’s Battery pack. eAssist is a “mild hybrid,” meaning it does not get plugged in, but rather works like a traditional hybrid, like the Hybrid Malibu. eAssist Silverados all come with a tonneau/bed cover and are available in both two wheel drive- and four wheel drive configurations. The transmission is a ten-speed automatic. The EPA mileage estimate is 18 MPG in the city and 24 MPG on the highway, which represents about a 13% increase in efficiency, when compared to V8 Silverados without eAssist.eAssist at Electric Ave

We’ll always have Paris…well, no. We won’t.

Paris vs. Big OilThe Trump administration today backed out of the Paris Climate Agreement, which had all but two countries of the entire planet as signatories. This action starts a process that will take until 2020 to complete. During his campaign, Trump had claimed that climate change was a non-issue, created by the Chinese to make American manufacturing less competitive in world markets.

Of course, today’s news comes as no surprise. Trump’s selection of the head of the EPA, Scott Pruitt, benefitted from campaign donations from the fossil fuel industry. Lobbyists, from the fossil fuel industry, drafted letters that Pruitt sent out on state stationery, when he was Oklahoma Attorney General. He sued the EPA, repeatedly to stop implementation of environmental protection rules. On the campaign trail, Trump said he wanted to get rid of the EPA and/or slash its number of employees, making it ineffective. The EPA, under Pruitt, has removed all mention of global climate change from the agency’s website.

On Trump’s first foreign trip, during his stop at the Vatican, the Pope gave Trump a copy of his encyclical on climate change, as a gift. I have to wonder if that embarrassing incident caused Trump to dig in his heels, even more, with regards to the Paris accord…

Now, it’s up to each of us, to save the planet. At the state and local level, we must push for changes to reduce carbon emissions. Local governments need vehicles. They should be looking at hybrids and EVs, where they are appropriate. Government buildings should be topped with solar panels or wind turbines.

We, as consumers, have the power to drive or accelerate change to reduce greenhouse gases. Your wallet is a powerful weapon. If you have the ability to shop for your electricity provider, select one who uses renewable energy, instead of coal or natural gas. I did this over 16 years ago, by switching to Green Mountain Energy. In the beginning, I paid a little more for this. Now, they are very competitive with other, non-renewable energy providers.

If you’re a homeowner, consider adding solar panels to your home. Generate your own, pollution-free electricity from the sun. Lately, I’ve seen companies advertise that they are building solar farms and will provide electricity at a flat, monthly rate to those who cannot put solar panels on their residence (apartment dwellers, those who don’t have good southern exposure, renters, etc.).

When you’re out shopping, select vendors who are making changes to be environmentally responsible. If they have chargers for electric vehicles, hybrid delivery vehicles, solar panels on the business, frequent their establishment and make sure the manager/owner knows that their behavior is what made you their customer.

Recycle as much of your trash as possible. The more we can recycle materials, rather than make them from scratch, the less pollution we generate and the less room we’ll take up in landfills.

Drive a vehicle that is appropriate. If your daily commute is you, alone in a vehicle, do you really need that large SUV? Wouldn’t a hybrid, electric or hydrogen fuel cell vehicle work? There are tax incentives (for now, at least). Take advantage of them! Ask your friends, who have these cars, what the pros and cons are. If you have a large family, that requires a large vehicle, use that room to carpool, reducing the number of vehicles on the road. Take mass transit, if possible. Is this convenient? Maybe not. Suffering from lung disease isn’t either.

Most importantly, make sure your elected officials know that environmental stewardship is important to you. Call, write, email them. Let them know this is a primary way you’ll determine who you’ll vote for, and then VOTE! There are many hot-button issues that the politicians use to keep us divided. The pro-life/women’s rights argument has swayed many an election. Ask yourself, “How many babies will struggle to breathe, if we abandon effective environmental stewardship?” One of my daughters struggled every time there was an ozone alert in our area. It sounded like she had whooping cough. It was agonizing for us. “How many babies will starve to death, if we create a new dust bowl?” If you are really concerned about the fate of the unborn, this should be an important issue for you, as well.

Nothing can change a politician’s actions quite as quickly as the threat of impending unemployment. Organize and push for term limits for Congress. Most elected officials today have one, most important issue, with which they’re concerned. It’s keeping that cushy job, in Washington. It takes a lot of money to get elected. They can spend all their time trying to get small, individual donations, or they can have a few dinners for their wealthy contributors and rake in the cash. Then they have become a minion of these donors. Someone like Bernie Sanders only comes around rarely. Most politicians take the easy way out and sell their influence for campaign donations.

But, you already knew this.

Start to act on it.

This behavior only exists because we allow it to exist. We are part of the problem. Instead of complaining about our elected officials’ corruption and short-sightedness, look in the mirror. Change starts with you.

Memorial Day in the car biz

Memorial Day Ad with Bolt EVMany of you like to get your new vehicle, during a holiday. You have plenty of time to shop and bringing a new car home is a great way to celebrate. In the car sales business, most dealers are open their usual hours and all hands are on deck, anticipating crowds. This is true of Classic Chevrolet, as well.

One thing is different in our ad, this weekend: The Chevrolet Bolt EV is featured in the ad’s banner! We began officially taking orders and have fifteen on order now. Eight of those already have deposits on them, as they were custom-ordered for clients. Based on normal order turn-around, I am hopeful our Bolt EV orders will arrive before the 4th of July.

If you’re in the DFW area, come on by and visit the “EVangelists” of Electric Avenue.2 Bolts at EA

P.S. An owner dropped the Bolt EV here so people can check it out and test drive it, before they’ll be common, in Texas!

At long last, the Bolt EV & Texas

Chevy Bolt EVIt had to happen sooner or later. I’m just grateful it happened ahead of schedule. The Chevrolet Bolt EV is now available to order, at dealers in the great state of Texas!

Yes, Texas is my home state.

We’ve been making a list and checking it…often. Now that the day has come, we are receiving deposits from those interested in getting the Bolt EV as soon as possible…or at least as quickly as you can in Texas.

If you’d like to get a spot on the list or want to test drive a Bolt EV, as soon as possible, call one of Classic Chevrolet’s EVangelists at (817) 310-1025.