How does the EV tax credit work? I pay over 7500 in income tax but do not owe an additional 7500 in liabilities at the EOY. would the 7500 credit reduce my taxable income

[silas448]

i am just trying to find out if i Can take advantage of the credit or not since i know its a nonrefundable credit making me worried that I would only be able to take full advantage if i owed and additional 7500 at the EOY.

[Bsch4477]

A credit is not subtracted from your income. It is subtracted from the amount of tax you owe. So if you owed $7500 in tax the $7500 in credit would zero out your entire tax owed. 

[silas448]

so lets say i make 100K and pay 14k in federal income taxes per line 18 of my  tax return.  Would the gov then owe me 7500 of that back in essentially the form of a tax return?

[VolvoGirl · Accepted solution]

It's not line 18.  Look at line 22.  So as long as Line 22 is more than $7500 (before applying the credit), you can use the whole credit.  It will reduce your income tax (but only to zero).  If your non-refundable credits reduce your tax to 0 you will get back all the withholding and payments and any Refundable Credits. Unless you owe for something else like self employment tax or the 10% Early Withdrawal Penalty on IRA withdrawals.

It's not whether you get a refund or tax due.   And the withholding doesn't matter.  It's if you have a tax liability on your income.

[silas448]

okay, line 22 is 14K so i would get 7500 of that back?

thanks for all your help!

[VolvoGirl]

The 7500 credit would reduce line 22 to 6500.  That is like getting 7500 back if you had that much in withholding and estimated payments.  You would either get a refund or have less tax due.  Just reduce line 22 by 7500 and redo the math to the end of the return and see how it works out.  

[Bsch4477]

In your example, instead of owing $14,000 you would owe $7,500 less or $$6,500.