2023 EV TAX Credit vs Tax Withholding

[CEN7URION]

I hope I’m making sense. Apologize in advanced. So I’m planning to purchase an EV. And estimably I will be eligible for $7500 Tax credit. I couldn’t really understanding how it works after tons of reading. So simply put it: Will I get the tax withhold back? Like in total for my withhold is 6000 and Fed Tax for 2023 is 7500. do I get the 6000 back and not owe anything? Or is it not what I think how it works?

[VolvoGirl]

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.  Look at your 1040 line 22 for total tax.  The credit can only reduce the tax 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.

[NCperson]

@CEN7URION- look at form 1040 and the subsection headings over to the left. 

Lines 16-24 is the 'tax and credit' section.  THAT is where you tax is calculated and THAT is where 'non-refundable credits (e.g. EV credit) are used to reduce the tax. 

Tax is not calculated anywhere else, although when someone says "I owe tax"  then tend to refer to line 37.  Technically that is not accurate; "tax" is only listed on Line 24, at the end of the 'tax and credit' section. 

"withholdings" are no more than a downpayment against the tax that is owed - look how Form 1040 is designed by reviewing the left hard sub-totals 

https://www.irs.gov/pub/irs-pdf/f1040.pdf

[Opus 17]

You misunderstand how the credit is awarded.  You need to look at your income tax liability, that is the amount the IRS keeps for the year, regardless of withholding.  For example, if you have $10,000 of withholding and got a $2000 refund, your tax was $8000.  If you have zero withholding and owe $8000 when you file, your tax is still $8000.  Also, some taxes don't count, like self-employment tax, and the penalties for early withdrawals of IRAs and other qualified retirement plans, improper IRA and HSA contributions, and so on.

If you expect your tax liability (what the IRS keeps) will be $7500 or more, you would get the full benefit of the EV credit.  If you change your withholding, you will get more money in your paychecks now and a smaller refund at tax season, but that doesn't change your eligibility for the credit.