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How does the EV tax credit work? I pay over 7500 in income tax but do not owe an additional 7500 in liabilities at the EOY. would the 7500 credit reduce my taxable income

Forum|Forum|2 years ago
December 9, 2023
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i am just trying to find out if i Can take advantage of the credit or not since i know its a nonrefundable credit making me worried that I would only be able to take full advantage if i owed and additional 7500 at the EOY.

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Best answer by VolvoGirl

It's not line 18. Look at line 22. So as long as Line 22 is more than $7500 (before applying the credit), you can use the whole credit. It will reduce your income tax (but only to zero). If your non-refundable credits reduce your tax to 0 you will get back all the withholding and payments and any Refundable Credits. Unless you owe for something else like self employment tax or the 10% Early Withdrawal Penalty on IRA withdrawals.

It's not whether you get a refund or tax due. And the withholding doesn't matter. It's if you have a tax liability on your income.

B

Bsch4477

Employee

A credit is not subtracted from your income. It is subtracted from the amount of tax you owe. So if you owed $7500 in tax the $7500 in credit would zero out your entire tax owed.

S

silas448Author

so lets say i make 100K and pay 14k in federal income taxes per line 18 of my tax return. Would the gov then owe me 7500 of that back in essentially the form of a tax return?

VolvoGirlAnswer

Employee

It's not line 18. Look at line 22. So as long as Line 22 is more than $7500 (before applying the credit), you can use the whole credit. It will reduce your income tax (but only to zero). If your non-refundable credits reduce your tax to 0 you will get back all the withholding and payments and any Refundable Credits. Unless you owe for something else like self employment tax or the 10% Early Withdrawal Penalty on IRA withdrawals.

It's not whether you get a refund or tax due. And the withholding doesn't matter. It's if you have a tax liability on your income.