Tax Credit Question Is it true ?

[mjwojtukiewicz]

SHOW ME. Give me a URL Why would they credit you owed taxes so you get a refund

The 'bummer' of the $7,500 electric vehicle tax credit: Its full value may be hard to get

The Inflation Reduction Act includes a tax break for consumers who buy electric cars. The tax credit's structure and other requirements create some headwinds.

www.cnbc.com

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The tax credit ‘bummer’: It’s nonrefundable​

 

[EvoPDX]

The amount of bad tax advice I'm seeing in here is insane. If your tax liability (keyword) is at or over $7,500 before your withholdings and other tax credits then you will qualify for the full credit. Otherwise, please consult your CPA if you don't understand...

 

[Occhis]

None the credit applied to how much federal tax you owe AFTER you do your 1040 and see how much tax you owe or are owed.

Not sure what that statement even means.

 

[mjwojtukiewicz]

Not sure what that statement even means.

You do your 1040. You put all your income and deductions in. If you owe $1 or more you can use the $7500 to pay it down but ONLY the amount you owe. If you owe more than that ($7500) you may have to pay a penalty (which I did last year)

 

[mjwojtukiewicz]

The amount of bad tax advice I'm seeing in here is insane. If your tax liability (keyword) is at or over $7,500 before your withholdings and other tax credits then you will qualify for the full credit. Otherwise, please consult your CPA if you don't understand...

You just said the samething I said

 

[mjwojtukiewicz]

The 'bummer' of the $7,500 electric vehicle tax credit: Its full value may be hard to get

The Inflation Reduction Act includes a tax break for consumers who buy electric cars. The tax credit's structure and other requirements create some headwinds.

www.cnbc.com

Scroll down to

The tax credit ‘bummer’: It’s nonrefundable​

Your link backs p what I say. YOU MUST owe up to $7500 inn federal tax and the EV credit will erase it. You owe less the credit is less

 

[tewest86]

Your link backs p what I say. YOU MUST owe up to $7500 inn federal tax and the EV credit will erase it. You owe less the credit is less

I’m new here but I think what’s confusing people is owing taxes. This has nothing to do with your withholdings. Several posters have broke it down clearly but yet some people still don’t get. The easiest way to explain to to tell ppl to throw out the withholdings you did for the yr. What’s you tax liability? It’s one of the lines on your form. I want to thank sever posters here who’ve explained it well. Especially the CPA who chimes in.

 

[mjwojtukiewicz]

I’m new here but I think what’s confusing people is owing taxes. This has nothing to do with your withholdings. Several posters have broke it down clearly but yet some people still don’t get. The easiest way to explain to to tell ppl to throw out the withholdings you did for the yr. What’s you tax liability? It’s one of the lines on your form. I want to thank sever posters here who’ve explained it well. Especially the CPA who chimes in.

You arrive at your taxes owed on 1040. You subtract your withholdings from that. If tat value is >0 then you owe that much. So to claim $7500 you would have to owe $7500. If you owe $2000 the credit wipes that out.

 

[EvoPDX]

You arrive at your taxes owed on 1040. You subtract your withholdings from that. If tat value is >0 then you owe that much. So to claim $7500 you would have to owe $7500. If you owe $2000 the credit wipes that out.

Wrong.. the tax credit comes first. Then you take into account withholdings.

 

[SteveV62]

So let's say you owe $10K in Federal taxes based upon your income. You withheld $10K already. If you bought a qualifying Tesla, you would get a $7500 refund. If you did not buy the Tesla, you would not owe any additional taxes, as your withholding matched your liability. Adjust up or down to match your situation.

I have a hard time believing too many folks can afford to buy a new Tesla and have less than $7500 in Federal tax liability.....

 

[BadTrainDriver]

You arrive at your taxes owed on 1040. You subtract your withholdings from that. If tat value is >0 then you owe that much. So to claim $7500 you would have to owe $7500. If you owe $2000 the credit wipes that out.

Dude just stop. You're a ****ing idiot who has no idea what he's talking about. You're completely wrong. Just stop.

 

[tewest86]

The confusing part is when the IRS site says it’s not refundable. That’s true but not really. If my liability is $18,000 and I file for the full credit, my liability is now $10,500. However, throughout the yr, I’ve paid $17,000, that means I get $6500 back because I’ve over paid on my tax liability. I know it’s semantics.

 

[ItsNotAboutTheMoney]

You arrive at your taxes owed on 1040. You subtract your withholdings from that. If tat value is >0 then you owe that much. So to claim $7500 you would have to owe $7500. If you owe $2000 the credit wipes that out.

Please, please stop. You are wrong.

It's a non-refundable tax credit so reduces tax liablity. It's in the tax and credits section and is nothing to do with withholding/tax payments.
It's taken in 2022 1040 Line 20, which is used to calculate Line 22. Line 22 cannot be less than 0 and that's where people can lose out on the money.

 

[ItsNotAboutTheMoney]

The confusing part is when the IRS site says it’s not refundable. That’s true but not really. If my liability is $18,000 and I file for the full credit, my liability is now $10,500. However, throughout the yr, I’ve paid $17,000, that means I get $6500 back because I’ve over paid on my tax liability. I know it’s semantics.

Yes, it's confusing.
Refundable tax credit: increases payments. Because it acts as a tax payment, you can get the money back irrespective of liablity.
Non-refundable tax credit: reduces liability. Because liability can't be below 0 you can't always benefit fully from it. (Also it's applied before certain taxes).

If they called them payment credits and liability credits it'd be clearer. (Well, at least to those who understand what liability means).

 

[john298]

So the part I have been tring to figure out. If I owe 7500. Does the ev credit get used first or the child credit. I ask this because the child credit is at least partly refundable. This is something I have been tring to find out because it does make a difference.

 

[Ratm68]

seriously, these sort of confusion are easily cleared with knowledgeable/qualified folks and then the water gets cloudy with folks spreading misinformation. Can folks like mjwojtukiewicz please post up their qualifications because the consensus is that you're spreading misinformation?

 

[Jerryr]

Is the following an accurate assessment?

The tax credit is not refundable, which means you must have federal tax due to take advantage of it. If your tax due is less than the credit amount, you can only claim the credit up to the amount of your tax due. You cannot use excess amounts of the credit on future- or previous-year tax returns.

Does this means in order to advantage of the Whole $7500 Tax Credit you need to owe taxes of at least $7500 (in excess of what was taken out of your pay already ) for the year you purchased your qualified Electric Vehicle?

Example:
If you still owe $2000 at the end of the year in Federal Taxes for 2023 you only get a $2000 credit. The rest of the credit is lost.

I filed my 2022 Federal Tax Return a few weeks ago. I had purchased a Nissan Leaf EV the end of last year and instead of having to pay the IRS an additional $881 over what was withheld, I received a refund of $6,619 yesterday. My total tax liability (Form 1040, line 19) exceeded the $7.500 so I was able to apply the full credit.

2023 tax credits should follow the similar rules except there is an Income limitation ($150k/$300k)

Mar 8, 2023

IRS TREAS 310 TAX REF PPD ID: 911173XXXX

ACH credit

$6,619.00

Snap shot from my checking account is above.

This should make you feel better.

 

[mjwojtukiewicz]

seriously, these sort of confusion are easily cleared with knowledgeable/qualified folks and then the water gets cloudy with folks spreading misinformation. Can folks like mjwojtukiewicz please post up their qualifications because the consensus is that you're spreading misinformation?

See the post after yours

 

[Ratm68]

I think Jerryr's post contradict what you are saying. With the scenario/example you described as to where this credit would apply, the $881 that jerry owed after withholdings etc, would be wiped out and he would owe nothing but since it's non-refundable, he wouldn't actually receive a refund for the remaining amount. What other's are saying is that this credit is applied to what you owe in taxes before withholding and deduction are taken into account , which is why he got a refund.

 

[ItsNotAboutTheMoney]

So the part I have been tring to figure out. If I owe 7500. Does the ev credit get used first or the child credit. I ask this because the child credit is at least partly refundable. This is something I have been tring to find out because it does make a difference.

(Non-refundable) child tax credit and EV credit are taken together.
So if the sum is greater than your taxes on Line 18 you'll not benefit the full amount.

On Form 1040:
(Non-refundable) child tax credit (Schedule 8812 Line 14) is Line 19.
EV tax credit is in Schedule 3, which is used to calculate Line 20.
Those are added together in Line 21.
Line 22 is the greater of ( Line 18 (a calculation of taxes) minus Line 21) and 0.