Looking for any additional detail or clarification from someone who knows on the IRA tax credit under section 25C, specifically on heat pump water heaters. From what I have read this is a non-refundable credit that can reduce my tax liability. Where I have seen disagreement is exactly what tax liability it is based on.
Is it a reduction of the overall tax liability - i.e. IRS Form 1041 lines 16 or 24?
Or does a taxpayer only receive the credit if they actually owe additional taxes when they file - shown in Form 1040 Line 37 ("Amount You Owe")
In other words - and to put numbers on it - if I plan my tax withholding correctly so that my total tax liability (line 16 or 24) is $10,000... and my payroll deductions total $11,000, leaving me a tax refund of $1,000... and the cost of a new heat pump water heater installed is such that I would receive the full $2,000 tax credit...
Would I receive an additional $2,000 back (totaling $3k tax refund because the $2,000 tax credit reduced my $10k tax liability to $8k)? Or will I receive no tax credit because I am already receiving a refund?
It seems like it should be the former (based on Line 16 or 24), but I have seen other explanations that seem to refer to the latter.
thanks for the feedback
