Hi Tbag57,
This is an excellent question and a lot of people get mixed up with owing at tax time, versus the tax liability. I'm not sure if this is how you are thinking about it, but for everyone reading this, let's be crystal clear.
So, you don’t need to owe taxes at tax time to claim this credit. You need to have a tax liability, which is different from owing. When you file your taxes, TurboTax calculates your tax liability, which is driven by your income. Then, when you claim the EV tax credit, you can eliminate up to $7500 of this tax liability. Whatever you had in withholdings throughout the year will then cover what’s left of the tax liability, and the remainder is your tax refund.
It is true that the EV credit is nonrefundable, which means that you can’t get back more on the credit than your tax liability, which is different from what you owe when you calculate your taxes.
Your tax liability, like I mentioned above, is impacted by your income and your household size. For example, if you are filing MFJ with no dependents, and your combined taxable income (income after factoring in the standard or itemized deductions) is greater than $100,000, you will most likely be able to see the full benefit of the EV tax credit, even with the IRA contributions. So don't feel like you'll need to miss that tax benefit to get the EV tax benefit! You can use this income tax table to see where your tax liability lies.
