$7500 hybrid car credit and child tax credit?

[wisconsin-guy]

I'm planning to buy a 2019 pacifica hybrid.  I read I need to have a federal tax liability for the year of $7500 to have the hybrid credit offset it.  I also have 2 children, married filing jointly.  When i estimated the federal tax for the year on my $100,000 of income, it was around $8,500.

If i have a $7,500 credit for buying this van, and a $4,000 child tax credit for my two kids, will I end up getting a $3,000 check from the IRS, or do I need to have a tax liability of $11,500 to "enjoy" both the car and child tax credits?

[Critter]

With the new rules the max you can receive for the refundable portion of the CTC is $1400 per child or $2800 for 2. 

[SteamTrain]

I already have a What-IF 2018 set op for MFJ and two young kids  (The CTC does depend on their ages)

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Closer to $8700 tax...assuming it's all W-2 income or ordinary income (no capital gains)

[Edited based on discussion below]

With the vehicle credits being used up first, and ordinary income right at 100,000, the 7500 credit matches your tax, with the refundable part of the child tax credits remains...thus a refund of ~2,800  (along with any other withholding you had done during the year).

This does assume you are using the 24,000 Standard deduction in 2018.

[SweetieJean]

Just be aware that your state may not have a Hybrid and/or Child Tax Credit, but will still tax any Roth IRA conversion. But you are still likely to come out ahead in the aggregate,

[wisconsin-guy]

I think if i had $8700 of tax, then the $7500 would leave $1200 to be used by the child tax credit, leaving $2800, or $1400 for each child as refundable part of the CTC.  My children are 2 and 4.  I figured if I did a $34,000 roth conversion and my $70,000 salary, that should put me at about $8700 for federal taxes owed.

[wisconsin-guy]

also, my state might not have a hybrid credit (don't think wisconsin does), but i'm more concerned with reducing federal taxes owed.

[SteamTrain]

Heck...that issue skipped thru my mind entirely. I hadn't thought about which credit is applied first....Looks like the Car credit is applied first...you're right.  (at least the way the 2018 What-IF applies it).

Could convert more IRA--to-Roth if you want to get to zero

[wisconsin-guy]

Yeah, I spent some time looking at the proposed 2018 irs forms to see how they will will be treating things.  At first I was mad that i wouldn't get the whole 2x$2000 child tax credit, but i didn't realize ther was an "additional child tax credit" that the rest rolls to, provided you have enough earned income.  I spoke with my CPA, he said I have the right thinking here.  PLUS, i'll get the $5385 of federal witholding back too.  neat!