For the federal EV tax credit, does the credit get deducted from my total income tax?

[charlotte16]

Suppose I will pay about $20,000 in income tax in 2023, and I will apply for the federal EV tax credit on my 2023 tax return next year. I suppose I would get the full tax credit (which is $7,500)? I have also heard people saying that the tax credit is based on my tax refund for that year (instead of my income taxes), so I would not get the tax credit at all if I get a tax refund (instead of owing taxes) after filing my tax return.

[SteamTrain]

No....it's your tax liability that the 7500 is applied against.....BEFORE considering any taxes you prepaid thru withholding or estimated payments.

(Grossly calculated)

Like, if you were single...and after deductions you end up with say 90,000 of "taxable" income.

Your initial calculated tax liability would be ~15,500, and the 7500 is applied against that, giving you a tax of $8000.

All your withholding is then compared to the $8000 tax to get whatever refund is involved now.

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It's the people who end up with the initial calculated tax of less than 7500 who don't get the full advantage of the EV  credit.

[SteamTrain]

When you get your 2022 tax return filled in.

IF you have somewhat similar income for 2022:

Check the value on line 18 of your form 1040.  That is your initial tax liability, and the 7500, will be subtracted from that $$ amount  later  (the 7500 will be all or part of line 20) to get you a new tax assessed value on line 22.

[charlotte16]

This is super helpful, thank you so much!