EV Credit Transition Rule

[tracy_zhang]

I booked a Santa Fe plug in hybrid in June 2022 assuming I could get the federal tax credit. When I actually got the car, it was 08/19 after the new EV law went into effect on 08/16, which excludes vehicle assembled outside of US. I did pay $3000 non-refundable deposit in June to book the car. I should qualify for the transition rule. But I only have a one page deposit receipt and one page booking form, which is not signed by both parties and do not say if the deposit is non-refundable. I was wondering if that counts as a written binding contract? Do I still qualify for the credit in this case?

[Anonymous_ · Accepted solution]

That would not appear to meet the criteria. You might want to check with a local tax professional.

See https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

In general, a written contract is binding if it is enforceable under State law and does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit). While the enforceability of a contract under State law is a facts-and-circumstances determination to be made under relevant State law, if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.