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Deductions & credits
I think it will be helpful for you to understand that the credit is subtracted from your tax liability. It will not be affected by your withholding. Here's an example-
Lets say the tax on my income is 8,500 and I had no withholding. I also get the 7,500 Electric Vehicle Credit. The credit decreases my tax liability to 1,000. I owe 1,000. My tax for this year is 1,000 total.
Lets say the tax on my income is 8,500 and I had 10,000 withholding. I also get the 7,500 Electric Vehicle Credit. The credit brings my tax down to 1,000, I had 10,000 withheld, so I get a 9,000 refund. My tax for this year is 1,000.
NOW lets say my tax liability is only 5,000. The credit will only be worth up to 5,000 no matter how much withholding was done.
The credit won't change based on your withholding. It is subtracted from your tax liability. Your tax liability is calculated FIRST, then the credit is subtracted, then your remaining tax liability (if there is one) is subtracted from your withholding, then you get any excess withholding back.
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