Electric Vehicle tax refund. How to maximize the full $7,500 credit?

[vpujols]

I found some tips/answers like the one in the following link, but still have questions:

https://ttlc.intuit.com/questions/4078683-if-i-purchase-an-electric-vehicle-with-the-7500-tax-credit...

In my 2017, I filed head of household with 1 child dependent. My 1040 form shows the following:

Adjusted Gross Income $ 62,728.00

Taxable Income $ 43,553.00

Total Tax $ 4,824.00

Total Payments/Credits $ 8,663.00 (tax withheld from pay checks)

Amount to be Refunded $ 3,839.00

Effective Tax Rate 7.69%

My situation didn't really change much for 2018. Line 47 shows $5,824 and line 63 shows $4,824 (child tax credit was $1,000).

Will I be able to get the full EV $7,500 tax credit or pretty much what line 63 says ballpark?

If I do not qualify for the full credit, anything that I can do to increase it, maybe don't claim the child and let his mom do it?

Any help to clarify would be appreciated.

[VolvoGirl]

One thing I can think of is to convert some tax deductible Traditional IRA to a ROTH IRA to generate more tax that you can offset.

[vpujols]

Yes, but it is too late since there's only 1 month left in the year and by the time I create the roth IRA my employer would take sometime to do it, so not an option I think.

[TaxGuyBill]

An IRA is not an employer plan.  Do you have any non-employer retirement accounts (such as a Traditional IRA)?  If so, you can "convert" it to a Roth by just asking the financial institution to do that.

[Texas Roger]

EV credit is a non refundable credit meaning it is limited by the amount of unused tax that it can offset. I said unused because the child tax credit is a higher priority credit and will be deducted from the tax before the EV credit is deducted. 

The taxable income on $62,728 minus $18,000 standard deduction for head of household filing status would be $44,728 in 2018. The tax from the tax table would be $5,095.The child tax credit increases to  $2000 for 2018 leaving $3,095 for the EV credit to offset. So you would get $3,095 of EV credit reducing your tax to $0. You would get back as a refund all of your tax withholding from throughout the year. 

[Texas Roger]

If you and his mother are not married, you could let her claim the child as a dependent and she would then get the $2000 child tax credit leaving you with $2000 more for the EV credit.

[Anonymous]

note tax certain additional taxes like self-employment tax can not be offset by the credit. 

[vpujols]

@Texas Roger  just a bit confused with this comment:

"So you would get $3,095 of EV credit reducing your tax to $0. You would get back as a refund all of your tax withholding from throughout the year."

Since my federal tax withheld was over $8,000, are you saying this in fact make me qualify for the full $7,500 EV tax refund??

[Texas Roger]

No. Tax withholding has nothing to do with how much credit you are eligible for. What I was saying is that your credit would offset the tax liability and so you would get back all the withholding. Your credits would pay your taxes and you would get a refund of your $8,000 of withholding. The credits you get will be equal to and limited by your tax liability. The exception would be self employment taxes if you are self employed. Credits cannot offset self employment taxes.

[vpujols]

In other words, and with the numbers I posted, it seems like I would only get $3,095 for the EV credit?
I apologize but not an expert with these figures.
Last year my tax refund was 3,839.00 and since I'm thinking about this EV tax credit of $7,500, I would like to have a ballpark idea of how much refund I will get (again, roughly).
Thanks again.

[Texas Roger]

If you had $8000 of withholding, you will get $8000 of refund. The $2000 of child tax credit and $3,095 of EV credit will offset (pay) your $5,095 of taxes.

[Texas Roger]

It might help you to understand it if you look at form 1040. I'll use 2017 form 1040 lines since it's a little more straightforward. Your tax liability is on line 44. That is what must be paid either from non refundable tax credits or withholding. The only way to get the credits is to pay tax with them first before using withholding. Non refundable credits are shown on lines 48 through 54. They are subtracted from taxes in the order listed on the form. Child tax credit is on line 52 and the EV credit is on line 54. So child tax credit will be deducted first from the tax on line 44. Whatever amount of tax is left can be used for EV credit. Since you will only have $3,095 of tax left to offset, that is what limits the amount of EV credit you can get because credits can only reduce your tax to $0. The total credits are on line 55. The credits are subtracted from the tax and entered on line 63 which in your case is $0. This shows that the credits paid your taxes. All the withholding on line 64 is not needed because the taxes were paid by your credits and you get a refund of all the withholding as shown on line 75.
Link to 2017 form 1040: <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/f1040.pdf">https://www.irs.gov/pub/irs-pdf/f1040.pdf</a>

[vpujols]

Thanks, looks like my only option may be to let his mom claim my son as a dependent. I've claimed this child since day 1, hopefully allowing her to claim him this time won't trigger a flag with uncle Sam...

[vpujols]

@Texas Roger

I just checked and line 63 from my 2017 shows $4,824, not zero.

[Texas Roger]

It would be 0 on your 2018 tax return if you get the credits equal to your tax liability. You did not have enough credits on your 2017 tax return to offset your tax liability so you still owed taxes after the credits. Were there any credits on line 48-54? What was the tax on line 56 after subtracting those credits?