@fpbear - you are correct!
The confusion begins because most think that the 'withholdings' on the W-2 is the tax you owe and it is not. The "withholdings" are simply a pre-payment of the tax. The tax is calculated on your tax return and not on your paycheck!
The concept of 'refundable' and 'non-refundable' isn't explained frequently either.
Here is an example:
Let's assume
1) EV credit of $7500 - this is a 'non-refundable' credit
2) AOTC (college expense credit) of $2500 - this is a 'refundable' credit
3) W-2 withholdings of $3000
4) Tax of $5000 - this is based on the IRS tax tables and appears on Line 16 of Form 1040. See link below on page 3
https://www.irs.gov/pub/irs-dft/f1040--dft.pdf
5) first, the non-refundable credit, such as the EV credit, can be used to reduce Line 16 but it can not take Line 22 below zero. You can't get a cash refund from these credits (so they are 'non-refundable'), but you can use them to reduce the taxes you owe, which is another way of stating Line 22 can't go below zero. In this example, $5000 of the EV credit reduced Line 22 to zero and the remaining $2500 is lost for ever.
6) Since AOTC is a 'refundable' credit, you CAN get cash from these credits. So since the AOTC credit is $2500 and the withholdings are $3000, they are added together in the Payments section (sum line 33 of Form 1040) , which is this case is $5500, As you state, the withholdings are also ' refundable'; they act just like 'refundable credits' and both are in the Payments section of the 1040 - meaning they are used the same way: refundable.
7) The result is a credit of $5500 (line 22 minus Line 33 on Form 1040) , which means you get a refund of $5500. if the result was positive you would still owe.
if you have a Solar credit, that is also non-refundable. The one difference compared to the EV credit is that if you can't use the entire credit this year (because using only part of the credit brings Line 22 to zero), you can roll over the remaining, unused credit to a future year. The EV credit doesn't have that flexibility.
does that make sense?
