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EV Credit and My Tax Situation

Hi everyone.  Each year, my payroll company calculates my taxes to where to owe nothing at the end of the year, nor do I get a refund, which is totally fine with me.  However, I purchased a new Tesla Model Y, which I'm told is now again eligible for the $7500 credit.  My understanding is that the credit is only good for tax liability, meaning that it only helps if I owe money at the end of the year.  I'm thinking about updating my tax situation with my payroll company to not pay taxes the rest of the year to be able to take advantage of the credit. 

Is this a bad idea?  Are there penalties involved in doing this? 

Thanks in advance.  

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4 Replies

EV Credit and My Tax Situation

You misunderstand 

 

look at Line 22 of Form 1040 . the $7500 will be used to reduce this number (but  not to less than zero) 


pull out your 2022 tax return as the line numbers will be the same on 2023. 


The credit reduces your tax liability- 

EV Credit and My Tax Situation

I DEFINITELY misunderstood.  This makes total sense.  I really appreciate the help!!!

EV Credit and My Tax Situation

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. So as long as Line 22 is more than $7500 (before applying the credit), you'll get the whole credit back.


The EV credit only reduces the tax liability on 1040 line 22 to zero. Then you will get back all your withholding. But it doesn't reduce any other taxes on line 23.

 

But technically you could reduce your tax withholding and get more back in your paychecks if the credit will reduce or wipe out the tax on your income (line 22).  

EV Credit and My Tax Situation

This makes total sense.  I was misinformed.  

 

Thank you so much!

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