Tax Credit For Dummies

[Jsfrye]

I weighing slightly used verse new. I need help understanding how the tax credit works. I know that after April 18, the MSRP needs to be under $80k and there are income restrictions. I get that part.
I need help understanding how the $7,500 works. Does this come off my taxable income? Or if I owe $8k and I get the $7,500 so I would owe $500? Or do I get back the $7,500 add to my return. Thanks for explaining it to me like I’m 5. I’m an IT guy and how taxes work is hard for me. Haha

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[Jsfrye]

the way I understand it is if I owe $8k then the tax credit is applied and I owe $500.

if this is the case I can adjust my withholdings to ensure I owe at the end of the year. Is this a good idea or dumb?

 

[TaxmanHog]

I weighing slightly used verse new.

You have the basic concepts down regarding how the tax credit affects your net tax liability, assuming you're making no major changes to federal income tax withheld through the remainder of the year, your refund could be $7500 richer than you expected in the past. OTOH if you make no payments, (Estimated or Withheld) then your gross tax of 8K would result in a balance payable to uncle of around $500.

The MORE important issue is that your MUST buy the truck new, as in not previously titled to another individual taxpayer who might have already claimed the credit, ..... see the problem with that? That's why it's a one shot deal per vehicle.

 

[TaxmanHog]

Are you a self employed IT professional?
Does a part of your hypothetical 8K tax including Schedule SE [Self Employment] social security/medicare taxes?

If so, that portion of your liability does not get credited with the EV tax credit, only your income tax enjoys this credit, so potentially your net balance due could be much higher than $500

 

[TaxmanHog]

I know that after April 18, the MSRP needs to be under $80k and there are income restrictions.

Actually this condition started 1/1/2023

Hopefully the NEW truck you are considering is under the $80,000 MSRP (excluding delivery fee and dealer installed options (DIO))

 

[Jsfrye]

Are you a self employed IT professional?

I am not self employed.

can you explain what you mean that “your refund could be $7500 richer than you expected in the past.”? If I typically Receive a refund of say $1,000 will I receive $1,000 +$7,500? Basically getting the $7,500 back with my taxes?

 

[shutterbug]

the way I understand it is if I owe $8k then the tax credit is applied and I owe $500.

if this is the case I can adjust my withholdings to ensure I owe at the end of the year. Is this a good idea or dumb?

Your withholding has no impact on the tax credit. For example if your total tax liability is $8,000 and your withholding for the year is $9,000, you will get a total refund of $8,500.

 

[TaxmanHog]

Extrapolating from what you're sharing....

$8,000 = income tax
$9,000 = federal income tax withheld
$1,000 = normal refund.

$7,500 = anticipated EV tax credit with no reductions due to AMT or other credits taking a priority.

$8,500 = refund check or EFT deposit in the spring of 2024

 

[Jsfrye]

Extrapolating from what you're sharing....

$8,000 = income tax
$9,000 = federal income tax withheld
$1,000 = normal refund.

$7,500 = anticipated EV tax credit with no reductions due to AMT or other credits taking a priority

$8,500 = refund check or EFT deposit in the spring of 2024

Thank you!!! I appreciate you

 

[Pioneer74]

I weighing slightly used verse new. I need help understanding how the tax credit works. I know that after April 18, the MSRP needs to be under $80k and there are income restrictions. I get that part.
I need help understanding how the $7,500 works. Does this come off my taxable income? Or if I owe $8k and I get the $7,500 so I would owe $500? Or do I get back the $7,500 add to my return. Thanks for explaining it to me like I’m 5. I’m an IT guy and how taxes work is hard for me. Haha

The income restrictions and $80k cap took effect January 1st.

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