Tesla Paid Zero Federal Income Tax in 2024, Despite $2.3B in Income

I may be the only one, but I was under the impression this whole time that all EV tax credits were for consumers who buy EVs, not companies who sell them.

I'd imagine that they are different people. Arguing with crowds can be a bit frustrating because the crowd will argue strongly in favour of something, then the winds shift and the crowd argues strongly against it without anyone really changing their minds. Ditto strongly believing contradictory things.

If we want to talk specifically about social media sites like HN, the conversation is really steered by the up/down votes rather than the people in the threads. Every possible perspective tends to get a comment then the gestalt decides which ones they like. The upvoters anonymous and the downvoters are often ... a weird crew with motives that are often hard to divine.

In reality, what is more damaging for the environment?

Replacing a 2019 Toyota Rav4 with a 2025 Tesla in North America, or.....

Replacing a 1985 VW Jetta with a 2019 Toyota Rav4 in India?

I see YouTube videos all the time where people in third world countries are using turn of the century hit-and-miss engines to power things like water pumps or machine tools. These countries are leaking countless gallons of oil and fuel into the ground using engines and equipment that are over 100 years old when Habor Freight sells brand new engines for $150.

To me, the ease with which you can sell a new car to a yuppy in the USA (who doesn't even need a new car) is baffling. Dollar for dollar, there is so much low hanging fruit. Don't get me wrong, I want to see first world countries lead the charge, but yuppys need to be more realistic in their "environmental" decision making. There is nothing frugal or environmental about having a 20" touch screen in the dash, or replacing your >5 year old car.

The way depreciation works is that a company buys something, like a computer, which is a business expense. Then at the end of the year, you're out the $2000 that you paid, but you still have the computer, which is now a used device and is now a year older. So it's no longer worth $2000 but it's not worth nothing. Suppose it loses $500 in value. Then the book value of the asset becomes $1500 and you have depreciation expense of $500. That depreciation is the deduction for this year, they don't let you deduct the whole $2000 the year you bought it. Next year you can deduct some more, until the book value of the asset is scrap or you dispose of it or sell it.

Estimating how much value it lost is subjective so the government specifies what percent of the value you can deduct each year. Straight line deprecation is when the depreciation expense is the same percentage of the original cost every year. Accelerated depreciation is when the early years use a higher percentage than the later years. In both cases the total amount of depreciation is the same but accelerated depreciation is often a better approximation for actual value. The true market value of a piece of equipment will decline more in absolute dollars in the first year than the fourth year. It's also what businesses typically pick when given the choice, because a bigger deduction now is better than a bigger deduction later.

It's not any kind of tax dodge at all, it's just an accounting method in the tax code.

That makes sense, thanks. Inflation makes debt cheaper to pay off in the future and transitioning into a right-leaning government hints at corporate tax rates being more favorable in the future.

I guess the caveat here is that it can be adversarial to short-term investors since the businesses assets are becoming worth less more quickly which gives less time for income to offset those expenses. That makes the company's expense:value ratio look worse.

I don't think the answer is to say that everyone needs to follow a linear depreciation curve. Fancy, new tech depreciates much more quickly in its early years than well-established tech. So the basic concept seems to make sense in some applications and I would assume Tesla has some pretty fancy tech that they're investing in.

On the other hand, this area feels a little fishy to me because a more accelerated curve limits the ability for a government to effectively apply taxation to companies during their administration. If companies were able to instantaneously depreciate their assets for 100%, assuming investors were OK with it, they'd just do that whenever the political winds blew in their favor for maximum savings.

It doesn't seem like there's any perfect, one size fits all solution. Accelerated depreciation seems fine, and can reflect the reality of investing in certain tech, but can also be abused by giving companies the ability to cash in when the time is right.

That's multiple years of increase being accounted for all at once.

Unfortunately, accounting is full of concepts like this.

Ideas which conceptually make accounting “better reflect” the real word, but in reality add a lot of complexity for very little benefit. Getting rid of accrual accounting and simply allowing full expensing of asset purchases with losses to carry over to the next tax period would save everyone a lot of headaches, for a negligible reduction in government tax revenue.

It would also make a lot of accountants redundant, which is probably the main reason they oppose streamlining accounting practices.

How would $800M in deductions cover $2.3B income to the tune of a 0% tax rate? Wouldn't they still be on the hook to pay taxes on $1.5B or is it not that simple?

EDIT: Oh, apparently tax credits aren't pre-tax. So if their tax liabilities on $2.3B were $300M then they'd owe $0.

I think the pivot makes sense. EV credit subsidies are drying up, let's pivot to subsidies for AI developments which the new administration may enable in order to maintain an image of superiority over foreign adversaries.

I don't think he's quiet quit but interest rates are high and he's realized there's way more money in robots and self driving.

The goal of a good CEO is to be forward thinking and that's what he's doing. Tesla continues to grow on many fronts and is still accumulating money in the bank.

Meanwhile most other car companies are in big, big trouble. (Volkswagen, GM, etc)

The potential sales of robots is huge. Everyone I know with kids would easily pony up 10k for a robot just to do their dishes. It’s a massive untapped market.

You have to come into the article believing a ton of things:

1. Tax credits are illegitimate

2. Accelerated depreciation is illegitimate

3. Ownership of productive companies is "hoarding wealth"

4. Journalism is in a battle with the current administration

5. Paying taxes is a good thing

If you _don't_ buy into these premises, for which there is no argument given for or against, you'll be tilted against the author. If you do, you'll be tilted against Tesla. This is polarizing. There is no nuance, there is no learning, there is no insight.

If they depreciated some assets faster, that only delays the taxes by a year or two. They'll still pay.

$300M in tax credits is basically the same as them paying $300M in tax and then getting a big check from the government for meeting some goal. I don't think it should be treated as any kind of avoidance on behalf of the company. Instead, check if the government paid that money for something useful, and if they didn't then blame the government.

Many people on this very website support large companies not paying taxes.

Tesla pays lots of taxes. They pay payroll taxes om their employees, they pay state sales taxes when they sell cars, &c.

This is specifically corporate income taxes.

> In what world is a massively profitable company paying almost nothing in taxes polarizing?

I mean they didn't just decide not to pay taxes. They followed the tax law. They accelerated some depreciation to take it now at the expense of a higher tax bill later. They took advantage of some government credits.

Corporate taxation is only one point of taxation. They pay payroll taxes, they pay sales tax on equipment they purchase at their factories, their employees pay taxes when they get paid.

Low corporate tax rates are unpopular because the optics are bad, but it doesn't actually mean that money is flowing through the company and into their employees without taxation anywhere. As soon as they do nearly anything with that money other than buy more parts to sell, taxes are being paid.

[flagged]

At least among economists it is not that polarizing. Most agree we should get rid of corporate tax. [0] In reality a corporation cannot pay taxes any more than a table can. Only people can pay taxes. So who pays the corporate tax? It must come from the corporation's consumers, employees, or shareholders (or some combination thereof). Raising the corporate tax is just a sneaky way of raising tax on one or more of those three groups.

[0] https://www.npr.org/sections/money/2012/10/18/163106924/a-ta...

up until I read how elon made his money - no majority of it didn't come from paypal or zip2. but from gvt contracts or loans.

that's when I learned I'm playing the wrong game by trying to provide private services instead of targeting gvt.

Sorry for the political comment but every time I see Tesla financials I think “this company should’ve failed in 2014 but-for those subsidies and ill-conceived carbon credits.”

I'll stop "thanking" Obama for the ACA when health premiums go back to something sensible. But honestly I liked everything else about him.

In 2024 Tesla sold more cars than Audi, employs 120 thousand people and accumulated $30 billion of cash from yearly cash flow.

But yeah, the guy that runs that company is a grifter.

That only works if you have a time machine or a crystal ball.

When those decisions were made, Tesla's CFO didn't know who'll win the election.

Trump will likely cancel the $7.5k EV credit so I don't see the "policies favorable to Tesla".

Trump was campaigning on renewing his previous corporate tax cuts and making more tax cuts. It's not a secret and not specific to Tesla.

That makes no sense, the integral of the tax credit is always the total value of the asset so it doesn't matter unless there are relevant tax brackets here? Businesses can also carryforward losses right?

> use accelerated depreciation to avoid taxes in a really profitable year

Tesla's earning calls tell me he should have just paid the taxes this year, in that case. Welp, hindsight.

That was with his money (you know richest person on the planet) and had nothing to do with Tesla.

I think the quiet part here is

1. Companies see downwinds of a recession, so they want to wait for good times to do anything. Actually grow, pay off debts, make lateral moves.

2. companies were banking on administration changes to help bailed them out. So far, they seem to have won that gamble.

so there's general truth and then there's speculation about used to influence decisions.

In my state, many of the new roads being built do in fact pay for themselves via tolls. I expect that model of financing to get much more common now that computers are able to automatically read your license plate and issue the toll.

Buying dogecoin or any crypto, security or asset can not be deducted though. Losses can be deducted, and the depretiation of various assets can be deducted, but the purchase itself isn't considered an expense and can't be deducted.

Otherwise all companies would just buy gold with their profits and never pay taxes.

Not all spending is tax-deductible, I believe that only expenses are generally 100% tax deductible on day one.

Buying Bitcoin doesn't reduce taxes. It's no different than investing company's cash into a different currency or bonds.

In fact, when Tesla bought Bitcoin accounting rules for Bitcoin were very unfavorable in that the bitcoin wasn't valued at the price in a given quarter but, and it's hard to believe, only at the lowest ever price. So on paper the company could only loose money by holding Bitcoin.

That idiotic rule was part of Democrat's lawfare against Bitcoin.

This accounting rule was changed recently.

Also, Tesla never bought Dodgecoin. That Techcrunch article is just wrong.

How much in taxes should you pay on a loss?

That's seems like a claim not root in an understanding of how businesses work.

If a company invest $3B to become profitable, it seem entirely logical that they can use those expenses to offset any future profit.

If you don't don't do that, companies that require large investments to become profitable simply won't exist.

What if they pay more taxes in the future by using a system for paying less take this time?

They were asking about private citizens, not corporations. Your wife isn't a corporation, is she?

If you're using business income to invest in yourself as an individual, that's pretty illegal where I live. Maybe it's different where you are.

The extent to which I can invest in myself is using business supplies or equipment for personal tasks here and there. Like, print some things or use some software I didn't pay taxes on.

I know some people go as far as driving their work vehicles around, but that's totally illegal both in terms of insurance and tax purposes here.

Did every CEO actively campaign for the current president? I'm curious tho were you upset when the "twitter files" were released and found out that the Biden campaign asked for hunter's dick pics to be removed?