I have ordered a Tesla Y RWD and expect to get it Nov 2023. I understood that I should get 7500 credit (assume the correct car and my filing status).
I calculate my tax for 2023 and the tax liability is $14000 on line 24 of 1040 but $14500 has been withheld and so I expect a refund of $500. So, I have no tax owed at filing. Yet because I buy a EV, I am expecting 7500 ev credit.
In this case, will I be able to the 7500 ev credit to reduce my tax liability of $14000? Thereby reducing my tax liability to $6500? And since I paid withholding of $14500, will I then get a refund of $8000??
It reduces line 22 not line 24. Then you will get back all your withholding and any refundable credits. But it doesn't reduce any other taxes on line 23 like self employment tax or a 10% early withdrawal penalty on IRAs.
And if your tax on line 22 is less than 7,500 and you want to take advantage of the full 7,500 credit you can increase your taxable income (like convert a traditional IRA to a ROTH IRA or sell some stocks with a gain). That will increase the tax on line 16 but even though it won't increase your refund you won't pay tax on the extra income. Then you won't be paying tax on that income in the future. If this confuses you just ignore it.
It reduces line 22 not line 24. Then you will get back all your withholding and any refundable credits. But it doesn't reduce any other taxes on line 23 like self employment tax or a 10% early withdrawal penalty on IRAs.
And if your tax on line 22 is less than 7,500 and you want to take advantage of the full 7,500 credit you can increase your taxable income (like convert a traditional IRA to a ROTH IRA or sell some stocks with a gain). That will increase the tax on line 16 but even though it won't increase your refund you won't pay tax on the extra income. Then you won't be paying tax on that income in the future. If this confuses you just ignore it.
@scso - other than you need to be looking at Line 22, the answer to your question is 'yes'.